There comes a time in everyone’s life when they are caught up in emergency situations but have no bank balance to clear the bills. This can be a difficult time as you are in need of money, but have no option to go to.
What to do when you are out of cash under such situations? Here’s where cash advance comes into play. A cash advance is when you withdraw money on behalf of your credit card from an ATM on advance fee. The fee is typically based on the amount you take and interest is charged on it.
What is Cash Advance Interest Rate?
When you withdraw cash advance with your credit card, you are charged with interest rate of the amount you took. Interest rates of cards differ depending on whether you have a gold, platinum or standard card.
This also largely depends on the financial institution so you need to be careful when you pick a cash advance company.
How is Interest Calculated On a Credit Card?
Interest is calculated on a credit card by determining the balance in the account on a daily basis and charged once per month. For example, if you bought something worth $500 on a credit card with a 10% interest rate then you would be charged over $8 with a time period of 30 days to pay it off.
As we know that interest is being charged on a daily basis, it is wise to clear the payments prior the due date. This way your daily balance will keep on deducting gradually and you won’t have to face a large amount of interest in the end.
It should be noted that credit card cash advance have higher interest rates than other interest types and can come with an additional fee as well. This fee may be as high as 5% in some cases. For instance, if you withdraw an amount of $1000, an additional fee of $30 will be introduced in your credit card statement. But, again, this largely depends on the provider you use.
When Are Cash Advance Interest Rate Charged?
The are charged at the very moment when cash is withdrawn until it is paid back.
Your interest free days are not affected until and unless you clear the payment before the due date passes.
Should You Go With Credit Cash Advance?
As discussed above, credit cash advance helps you out when you’re out of money or in a state of emergency and need money.
There’s no doubt about the fact that it may turn out to be dangerous if you are making a habit out of withdrawing cash free advance more than often because at the end of the month you’d be looking at a huge interest. So you should be careful with cash advance and try to avoid it as much as you can.
- Use them in utter need of emergencies only. Do not think that you’re going to get away with the additional fee and interest rate because at the end of the month you are asked to pay everything which is printed on your credit card statement.
- Repay the cash as soon as you have some. Do not wait for the last moment to clear up the payment because credit cash advance is charged immediately, therefore, you need to pay the amount before the next statement greets you.