What is a Cash Advance on Credit Cards?

Credit Card Cash AdvancesCredit: morguefile.comUsing a Cash Advance, especially with credit cards, can work, if you stay on top of the rules.

Many credit card companies, now offer "zero interest" for a certain amount of months, sometimes a year or longer, in the hopes you will either transfer other credit card balances to their card, or many will offer "cash advances" for up to your limit for zero percent.

Credit Card Cash Advances, can work for you, if you pay attention to the dates.

If you decide to follow through with an offer of a "cash advance" from your credit card company, for a lower or zero percent interest rate, then make sure you write the date that this advance needs to be paid back by, on your calendar.

The credit card company is NOT going to remind you. They are hoping you will be too busy to stay on top of that date, and then they can charge you interest, and in some cases, they will backdate the interest to when you first got the advance, if you do not pay this off in time. They will have this written in their fine print, or will explain this to you on the phone. Usually you are so excited about getting this money, you may not really hear the conditions.

Do Not Use This Credit Card for any other Purchases!

There is another catch, you have to watch out for. If you take an advance on this credit card, then DO NOT use this card for day to day purchases. For if you do, any payments you make towards your card will always go towards the low or zero interest advance, leaving the purchases to sit at their normal credit card interest rate. This could be 17% or higher.

€Example: If you take $5000.00 as an advance at zero percent, then treat it as a loan and set yourself up an automatic payment to this card of $416.67/month. This will make sure you pay back the $5000.00 in the 12 months they gave you. Then put this card away, and use another card or cash for your day to day purchases. Consider the card with the advance, a loan, and treat it as such by making regular payments.

If you, for example, go out and buy something for $80.00 using this card, and figure you will just add $80.00 to your next payment of the advance, you are in for a surprise. Your payment of $416.67 plus the $80.00 purchase will go towards the advance only, leaving your purchase sitting there with normal interest charges accumulating, until you pay off the zero percent advance. So, don't use this card for anything else!

If you do this, then you will have the advance paid off in time, and you will have effectively borrowed that money for FREE. This is a great way to get business start up money, or pay off other bills, or car repairs, or a million and one things we could always use money for.

Credit Card AdvancesCredit: morguefile.com

Just make sure you follow these rules if you use a credit card cash advance:

1. Pay if off before the special rate expires.

2. Don't use this card for other purchases (this is where they will make their interest off of you)

3. Set up a payment schedule, just like a loan, so that you will not run out of time before it is paid off.

If you slip up with any of the above rules, you may be faced with huge interest charges, and will not benefit from these cash advances. Just take the time in the beginning, and work out if you can afford to pay it back in time, and if you can, then go ahead and use their money for FREE!


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