Save money by using this credit card feature wisely
A credit card cash advance is a withdrawal of cash from your credit card. Making a cash advance can be convenient when you are occasionally short of funds, but there are costs, and in some cases, limits on certain cash advances. Here’s what you should know before you choose to make a cash advance to your credit card.
There are two kinds of cash advances:
Bank Cash Advances – This is when you use your account for a loan, such as withdrawing cash at an ATM, transferring funds from your credit card for Overdraft Protection or using your credit card for money orders. Bank Cash Advances have a limit called a Cash Credit Line, so it’s important to remember that only a portion of your Total Credit Line is available for these types of transactions.
Direct Deposit and Check Cash Advances – This category of cash advances includes writing access checks or calling your bank to transfer funds directly from your credit card to a deposit account. Unlike Bank Cash Advances, there is no Cash Credit Line or limit for Direct Deposit and Check Cash Advances as long as they do not exceed your Total Credit Limit.
There are several reasons you may want a cash advance:
- You need to pay by cash or debit and you don't have enough money in your account.
- Your expenses are higher than usual because of an emergency or unplanned purchases.
- Your paycheck is late or smaller than usual.
Credit card cash advances often have higher fees than purchases with your credit card. Make sure you know your cash advance fees and rules before making a withdrawal.
- Cash Credit Line: This is the portion of your Total Credit Limit that can be used for Bank Cash Advances.
- Transaction fee: You will pay a transaction fee for credit card cash advances.
- APR: The APR for cash advances is often higher than for credit card purchases.
- Interest-free period: Cash advances often begin accruing interest at the time of the withdrawal, meaning there's no grace period.
Credit card cash advances can be an important source of funds in an emergency. They may also help you avoid overdraft fees or getting a “pay-day loan,” however they have their own costs. To limit your banking fees, consider these options before you take a cash advance:
- Make purchases with your credit card. If you have the option, you can often limit interest and transaction fees by charging purchases to your card rather than getting a cash advance.
- Limit transaction fees. Some transaction fees are a percentage of the transaction; in this case, it would be best to withdraw only as much as you need to limit transaction fees. Other transaction fees may be a flat rate or a combination of a flat rate and percentage of the transaction. In this case, you might take all the cash you think you may need at once instead of multiple smaller transactions, so you only pay the fee once.
- Think about repayment. How long will it take you to pay back the cash advance? Remember it will be accruing interest until the amount is paid off.
Here are some ways you can avoid the need for a cash advance:
- Avoid unnecessary purchases. Ask yourself if the purchase is worth the extra fees you'll have to pay from a cash advance.
- Check your balance. If you don't know how much money you have in your bank account, you risk getting caught short. Use Mobile Banking1 to check your balance and monitor when bills are deducted.
- Create a budget. A budget will help you compare your income to your costs, so you know how much extra you have to cover unexpected expenses.
- Build an emergency fund. Occasionally you'll need to pay for things that aren't in your monthly budget, such as car repairs. By building an emergency fund when things are going well, you may be able to avoid having to use credit card cash advances for these transactions.
Your credit card statement includes information on credit card cash advances. If you are still unclear about Bank Cash Advances and Direct Deposit and Check Cash Advances, refer to your Credit Card Agreement or contact your credit card company for more information.
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1You must first enroll in Online Banking, and set up Transfers and Bill Pay. Wireless carrier fees may apply.