Why You Should Avoid a Credit Card Cash Advance

how to use a credit card wisely, best way to use a credit card, use of credit cards, how to use a credit card online, how to use credit card, how to use a credit card, best way to use credit cardYou are probably aware of the fact that the credit card also allows you to withdraw money from an ATM just like an ATM card. The difference is that the money that you take out using your credit card is considered as money given out as advance on credit and hence is chargeable by interest. While it may seem like nothing much to withdraw money from an ATM machine or your credit card it is in fact quite different to taking out money using an ATM or debit card. The money that you take out from an ATM machine using your credit card is called cash advance.

Usually you should do all to avoid taking out money on cash advance using your credit card. The reason is that whenever you take money out using your credit card you will be charged an extra fee and cell as an interest on the money that you borrow. Whatever money that you withdraw from the ATM using your credit card will be considered A loan. As any other loan the money that you borrowed will be chargeable by an interest rate. A cash advance usually has a fee attached to it which typically ranges from 2 to 4% of the money withdrawn. Apart from this cash advance fee they might be an additional ATM fee depending on which bank’s ATM machine you have used. As long as you’re using a machine off your own bank you will not be charged this fee.

The reason why cash advances are discouraged is because the interest rate on a cash advance is usually more than the interest rate on your credit card. You will pay more as interest on a cash advance then you will if you would pay directly using your credit card and revolving balance to another month.

The rules regarding paying off the balances on a credit card for a credit card company have changed from February 22, 2010 . earlier the credit card companies have the option of paying off whichever balance present on your credit first. This meant that if your credit card was carrying multiple balance like a purchase balance and a credit card advance balance when they could adjust your immense towards the lower interest purchase balance while the credit card advance balance continued to accrue interest at a higher rate. However since the rules have changed since new laws come into effect on February 22, 2010 the credit companies are now required to pay off the balance with the higher rate of interest first.

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