Cash Advances: What You Need To Know
As much as we’d love to be financially prepared for unexpected circumstances, the truth is that it doesn’t always happen. Maybe you have a small emergency fund, but you depleted that plus what’s left in your checking account. Now the rent and utilities are due in the same week and you need to pay your babysitter for her help last week.
In this case, it can be really tempting to get cash the fastest way you can, like with a cash advance. Different types include a credit card cash advance or a short-term cash loan (better known as a payday loan).
While a cash advance can be a quick and easy way to access cash, it can also be expensive; you could be paying a cash advance and ATM fee (if you’re using your credit card) for the privilege, plus a higher interest rate than what you’d find for other types of loans (including credit card purchases).
Cash Advances: What You Need To Know
Before getting a cash advance, it’s important you understand how they work so you can understand how much you could be paying for the privilege. There are other options to access cash fast, many of which could be a better choice.
How Do Different Types Of Cash Advances Work?
A cash advance is defined as a way to buy cash using a credit card at a bank or ATM. Cash advance loans are provided by many credit card issuers, are available up to a variable limit and must be paid back like any other credit card purchase. Unlike other credit card purchases, cash advances are subject to high fees.
This means you can use your credit card to withdraw cash from the ATM in order to get a short-term loan. In other words, instead of putting purchases fast payday loans Tennessee on a credit card, you’re making a purchase with cash by using your credit limit on your card. However, the limit could be capped, so check with your issuer first.
How it works is that you set up a PIN number with your credit card issuer and then use your card like you’d use your debit card to get cash advances from an ATM. Your limit is typically defined by the available balance on your credit card. If you don’t have a PIN, you may be able to take your credit card to a bank that offers advances through a payment network (such as Visa or Mastercard) after showing ID.
Another type of cash advance is a payday loan. Unfortunately, these types of cash advance loans aren’t necessarily as clear-cut as cash advance loans are in terms of availability and terms. Typically, it’s a short-term high-interest loans for a small amount. Depending on state laws, you can either get these cash advance loans online or through a storefront.
Once approved, your loan process can either be handed over in cash or with a check, deposited into your bank account or loaded onto a prepaid debit card.
You usually repay this type of loan in one payment when your next paycheck comes around or when you receive another income source (like Social Security). Once you take out the loan, the due date should be indicated in your agreement. Some lenders will debit directly from your bank account and even offer to do so in installments over a specified period of time instead of with a lump sum.
Although you can take out a cash advance from a credit card whenever you want, you do need an initial credit check to be approved for the card in the first place. For those who aren’t in the position to get a credit card, a payday loan can seem like an attractive option because these types of cash advance services don’t require a credit check.