Borrowing Cash Through Credit Cards
June 25th, 2008 | by admin |
If you have ever been in a pinch and needed immediate cash, in a hurry, and wanted to do so without any applications or loan interviews, you may consider borrowing cash through credit cards. You can withdraw cash from any ATM, at a bank or credit union, or via a paper “convenience” checks from your credit card company. There is no waiting and you have cash in hand for yourself, or emergency expenses, immediately.
Borrowing cash through credit cards is a finance option, but may add to your monthly fees and may also have a higher annual interest rate (APR). Many credit cards offer “cash advances“ and “convenience checks“, but they also charge higher interest rates and fees for taking advantage of this privilege. If you have a pressing emergency, it may be a good option from which you would benefit. If you can avoid doing this, you will avoid the high fees, and interest charges that roll from month to month because these cards will apply monthly payments to your other purchases with lower interest rates before they apply any payments to these “advances”.
Some credit cards charge higher fees, and varying fees, according to where you actually draw out the cash advance. They will charge one fee for cash advances from an ATM at the corner store, but higher rates when you utilize cash advances from ATMs in certain businesses. If you get an advance from an ATM at a casino, they add a fee of $5 or $10 just because it is from that location, instead of $2 or $3 as usual.
One way of borrowing cash through credit cards is to do a balance transfer. In this case, you have a good deal if you are transferring a balance from another high interest card to a new card with special, lower rates for balance transfers. However, there are time limitations involved here also, and if you miss the end of the time period, you will incur additional charges. Usually this is an offer made when you open a new card. There may be an offer of zero percent interest on balance transfers for, say, six months. If you have no other charges on that card, and can pay off your transfer within six months, you will save some interest and it is a good deal. The question that arises is, if you can pay off the transfer in six months, how much actual interest will you be saving? Some people do balance transferring in a chain manner, opening new cards, transferring balances, closing old cards, and so on. This only works if you have good credit and can keep your payments going. Like any other loan, if you don’t make the payments or miss your time frame, you are going to be in trouble, and possibly damage your credit report. If you are late more than once, some penalty rates and fees may apply.
Another thing to remember when you are borrowing cash through credit cards is that interest will accrue from the moment you make your withdrawal of cash. Watch for cash advance limits, so you do not go over them and incur an “over-the-limit” fee. Some cards require a security deposit in the amount of your limit. In that case, determine whether or not getting a cash advance is better than using your savings that you would put down to get the credit card. If you do not pay, you lose your security and harm your credit record.
Another convenience offered for borrowing cash through credit cards is the blank paper check you can request from your credit card company. Some companies offer these interest free, others charge rates of 18% or more; you need to carefully read the fine print before you write checks. There may be a small transaction fee, so you would get the best benefit by writing large checks. Interest is not charged until the check is cashed. You can write these checks for any purpose, even to yourself. If you have the zero interest rate, frequently there is a flexible time schedule for repayment, so it makes sense to borrow with checks to pay off other high interest balances.
In today’s economy, it pays to be careful with your use of credit. Borrowing cash through credit cards is an easy, convenient way to deal with short term emergencies. As with any credit use, borrowing from one place to pay another should not become a lifestyle. Read the small print!