by Harvey Bond
When you’ve been a customer for a few months, your credit card company may start sending you checks that you can cash. These are known as cash advances. Cash advances can save you if you have a financial emergency, but in most cases, they are a bad idea.
Before you cash the check your credit card company has so generously sent to you, make sure you understand the implications of doing so. You should always understand your finances fully before making any sort of financial decision! This will keep your money from disappearing, helping your stay or get out of debt.
Cash advances don’t just come from your credit card company. There are companies that specialize in cash advances as well. Every policy is different, so if you do not understand how your company works withcash advances, make sure you talk to a representative before cashing the check.
Simply put, cash advances usually hurt you rather than help you. They can only be used well in certain instances.
For example, if you are in an accident or your car breaks down and you need to pay for repairs immediately, but won’t get paid again for another week, you can use a cash advance to get your car back on the road. Think of a cash advance as a short-term loan with very high interest rates.
Again, every company is different, but usually if you do not pay back your cash advance immediately, there are huge fees and fines. Your credit card balance may jump quickly, causing your interest rates to rise and your credit score to fall.
Cash advances sometimes have higher interest rates than your card in general, so be careful to review this payment you’ll be making. In an emergency, a cash advance can help you out, but you’ll probably be better off simply using your credit card.
Don’t use a cash advance to pay the minimum balance on your credit card. This is a downward spiral into unsolvable debt. Make sure that you only use a cash advance when you absolutely need to, and pay it off as soon as you receive your next paycheck.
The best thing to do, however, is to tear up the cash advances your credit card company offers so that you aren’t tempted to cash it. Resist that temptation and you’ll have a better chance of staying out of debt.
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