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Drawbacks of Credit Card Cash Advances

There are two kinds of credit card cash advances. The most common type occurs when you use your credit card as a debit card and withdrawal money from an ATM. This kind of cash advance usually has a cash credit limit and so will only compromise a certain fraction of the credit card's total credit line. The second type of credit card cash advance lets you take money directly from your credit line. However, instead of just withdrawing money, your credit card is used to transfer money to a bank account or write a check. It depends on the credit issuer whether or not this type of cash advance will lower your total credit limit. Nevertheless, both kinds of credit card cash advances come at a high cost, and so you should reconsider making this type of transaction. Here are some of the major drawbacks of credit card cash advances.

Subject to Exorbitant Fees

There are all sorts of fees that are associated with credit cards. However, none is so exorbitant as with credit card cash advances. Many people make the mistake of thinking that cash advances are a convenient way to get their hands on needed funds, but they end up paying the price once their credit card bill comes, and they have a substantial amount of fees and interest tacked on from the advance. It depends on your issuer how exactly your fee will be calculated. Sometimes it is a flat fee that is charged no matter how much money you withdraw. Other times it is a certain percentage of the amount you withdraw, which typically falls between 2 and 5 percent. However, the most common is a combination of the two to charge both a flat fee and a percentage.

Will Likely Be Charged an ATM Owner Surcharge

When taking out a cash advance from an ATM, be aware that on top of the regular cash advance fees and the high-interest rate, you'll likely be charged an ATM owner surcharge. This fee typically falls anywhere between $2-5. Although it is the lowest of the costs associated with a credit card cash advance, it still has the potential to add up.

Often Will Be Charged Interest Right Way

Taking out a cash advantage often will subject you to paying interest from the moment you take the cash out. Typically, when making routine purchases on your credit card, you will get a period in which you are interest-free. This ranges from 45 to 60 days depending on your particular credit card. However, for cash advances, you are not afforded any breathing room.

Won't Have Purchase Protection

If you buy something with the cash obtained from a credit card cash advance, you will not be given the same purchase protection afforded to you from making the purchase on your credit card. On the other hand, making a purchase with your card will give you the added advantage of being protected by your credit card company in the case that the goods do not meet your expected standards, or you don't receive them.

Will Cost More When Traveling Abroad

If you go abroad and find yourself in need of cash, then a credit card cash advance may be a tempting option. However, doing so will be even more expensive than in your home country. This is because using an ATM abroad with a foreign credit card will subject you to an additional, higher charge on top of the withdrawal fee and the high-interest rates. Usually, the foreign usage fees, which is charged by most credit cards, will fall anywhere between 2.5 and 2.99 percent of the amount that you took out from the ATM. On top of this percentage, you may be subject to an additional fee charged by the local bank's ATM.