Strategies to prevent additional charges and interest
In a time of need, having quick access to cash can assist you in meeting the financial demands of a sudden or unforeseen disaster. However, one of the things that makes cash advances from credit cards so unpleasant is the high-interest rates that can be attached to them. In addition to the interest rate, which is usually more significant than the rate on routine purchases made with a credit card, you will typically be required to pay a charge.
Cash advances come with several drawbacks
- The majority charge a fee that ranges from three percent to five percent of the advance amount, with a minimum charge of ten dollars.
- In most circumstances, the interest rate is larger than the rate on purchases (in some cases, 10 percentage points higher or more). There is no grace period during which interest does not accrue; therefore, you cannot avoid being charged finance fees even if you pay your bill as soon as you get it.
- You may only have access to a fraction of your credit limit when you take out a cash advance.
- Some automated teller machines have a cap on the total amount of cash that can be withdrawn in a single transaction and charge a fee for using the ATM.
Suppose you are considering using the available credit on your credit card to get access to cash. In that case, you should pause for a while and think about the other choices first. There are ingenious ways to obtain cash from a credit card in place of actually making a cash advance request. These approaches could incur expenses on your part. Still, they could be more cost-effective depending on the amount of money that you require.
In addition, if you have good credit and qualify for a new credit card, taking these steps while using a card that has an introductory offer of no interest could help reduce your expenses even further. This is especially helpful if you are trying to get caught up after an unexpected crisis and need some time.
Invest in a gift card that is prepaid
You can use your credit card to purchase a prepaid gift card and subsequently resell it to someone else for cash. Be sure that whatever discount you give is lower than the total amount of interest and fees that you would have been required to pay for a cash advance. You might have to agree to sell the gift card for a slightly lower price than its face value to get someone to buy it from you. Still, many online marketplaces can help you with this process, such as Giftcard Granny and Raise, to mention just a few.
If you have a reward points balance on your credit card, you might be able to trade them in for a gift card, sometimes even for a higher amount than the card's face value. For incentives that are only worth $20, you might be able to acquire a gift card for $25 instead.
Find a companion who relies on cash
Suppose you have a friend or relative preparing to make a significant cash purchase. Your close friend can provide you with some of their money (or deposit the funds into your bank account, perhaps using a peer-to-peer payment service.) In that case, you are more than welcome to use your credit card to complete the transaction on their behalf.
The scenario described above does not violate any regulations. However, their service to obtain a cash advance from your credit card is prohibited by the majority of major peer-to-peer payment providers. The terms of service for payment platforms such as PayPal, Venmo, and Cash App, for example, expressly forbid doing so. If you violate this policy, the provider may suspend your account or take legal action against you.
Make some adjustments to your billing
If you can pay for something with your credit card that you would typically pay for with cash (or with money currently in your bank account), you should do so to free up that cash. This could be especially useful if you receive a new credit card with a promotional period during which there is no interest charged on purchases or balance transfers. You will not be charged interest on your balance during this period and will have more time to pay it off.
When paying your bill with a credit card, some billers and landlords will charge you a convenience fee. Even though the charge is larger than the cash advance fee you would otherwise pay, it may still be worthwhile if you are not subject to a higher cash advance APR. The fee would be lower than the cash advance fee you would otherwise pay in a perfect world. Because of this, it is essential to examine your entire expenditures before deciding which method of obtaining cash will be the most cost-effective for you.
Pay for an item using your credit card, then resell it for a profit
If you are willing to search, you may be able to purchase things at rates lower than the going market rate by taking advantage of discounts, offers, or points offered by your credit card company. After that, you'll be able to fetch a greater price when you sell those products either online or to a friend. The profit may provide you with the cash you require and a tiny bit of extra money to cover the interest charges on your credit card if you need some more time to pay off the balance. There is a possibility that you will not be able to sell the item at all or earn a profit from its sale.
What you should be on the lookout for
Don't be fooled into thinking that you'll be able to avoid the higher fees and interest rates associated with cash advances just because you choose one of these alternative payment methods. Many credit card issuers treat things like money order purchases and credit card–funded wire transfers the same way as cash advances. You should review the terms of the agreement you have with your credit card company to learn how the cash-equivalent transactions are defined.
Remember that you are still borrowing money with your credit card, even if the fees associated with these other options are lower than those associated with cash advances. If you cannot pay off your monthly credit card balance, you will be subject to financing charges. However, these fees will be assessed at the standard APR connected with purchases.
You may be easily sidetracked if a sudden shift in your financial circumstances takes place. Make sure that you have enough accessible credit to pull off one of these maneuvers to avoid the danger of incurring an over-the-limit fee.
Frequently Asked Questions (FAQs)
What are the steps involved in obtaining a cash advance with a credit card?
You can acquire a cash advance from a credit card by using an ATM with your PIN or going to a bank asking for a cash advance. Both of these options are available to you. For the bank to verify that the card in question belongs to you, you must provide the physical card itself. They will very certainly ask you for identification as well.
Without a Personal Identification Number (PIN), how can cash be withdrawn from a credit card?
Suppose you do not have a personal identification number (PIN) associated with your credit card. In that case, you will need to withdraw cash from a bank. You should contact the issuing company of your card as soon as possible to acquire a new PIN. Because PINs are typically addressed to the cardholder's registered address, the time it takes for you to obtain yours can range anywhere from a few hours to a few days.
