Collaborative Post¦ Credit cards are now widely accepted worldwide, particularly cards supported by VISA and MasterCard. However, this support is not yet universal, with cash remaining king in many situations, both in the Philippines and abroad. If you’re stuck in a cash-only situation without physical cash, however, your credit card may still prove useful.
Many credit cards allow you to take a cash advance over ATMs supported by the card provider, giving you real cash in moments. This can be an especially convenient way to get physical cash during serious emergencies. Even if you have healthy finances, having a cash advance credit card—like the Landers Cashback Everywhere Credit Card for Landers members, offered by Maya—can be a great way to increase your financial flexibility during all kinds of unexpected events.
There is one major caveat to cash advances in that, as a rule, they carry higher interest rates and fees compared to regular credit card purchases. Interest on these loans is also usually calculated upon withdrawal, which means that you will have to pay some kind of interest regardless of how quickly you pay the loan back. Taken together, these factors make card advances a significantly more serious debt burden than typical credit card purchases.
If you want to use the cash advance feature on your credit cards, you should be especially mindful about your approach. Here are a few ways you can keep cash advances from overwhelming your finances:
1) Don’t Treat Cash Advances Like Free Money
No matter how reasonable the terms, cash advances always have associated costs. Credit card providers have to put up with serious risks when they give advances, which is why there are often multiple fees associated with them on top of the interest. Learning about these fees and why they exist can help hammer home the risk of cash advances and let you arrive at the wisest decisions for managing your credit.
2) Use Cash Advances Only in Emergencies
Cash advances are best treated as a last resort. Reserve these capabilities only for true emergencies, such as medical expenses or to meet business payrolls at the last minute. Never use them for luxuries or everyday spending.
3) Borrow Only What You Need
Borrowing more than the absolute minimum that you need will needlessly increase the total interest you owe. Avoid adding to your financial burden by only taking the amount you need to cover the event that necessitates a credit card cash advance.
4) Repay the Cash Advance ASAP
As mentioned above, interest on cash advances starts accumulating right after you withdraw the funds. Unlike regular credit card purchases, there is also no grace period for cash advances. If you make an advance, you will want to prioritize repaying it as soon as possible to prevent the debt from snowballing.
5) Make More Than the Minimum Payment
If the advance is more than you can easily pay, at least, pay more than the minimum monthly payment. Minimum payments are not going to significantly reduce the principal balance, and sticking to these amounts will make debt repayment an excruciatingly long and potentially more expensive process.
6) Avoid Multiple Cash Advances
Taking multiple cash advances is often a mistake that can quickly escalate your debt beyond your capacity to repay it. If possible, limit yourself to one cash advance, and use the time that it buys you to research less expensive loan products that can address your needs.
7) Use Alternative Borrowing Options When Possible
Speaking of less expensive loans, it’s a good idea to check out your potential alternatives to cash advances before you take one out. There are plenty of other borrowing options which, though not necessarily as fast or convenient as cash advances, may be much easier to pay off.
In particular, some banks and mobile wallet platforms also offer loans at lower rates compared to standard cash advances. Avoid payday loans or unregistered lenders since the risk of these could be potentially worse than what you’d get from cash advances.
8) Avoid Using the Cash Advance for Non-Essential Purchases
While some people do use credit card cash advances to fund non-essential purchases like vacations, gadgets, or entertainment, this is almost certainly the wrong way to use this option. Consider using other options instead, such as Lease-To-Own from a reputable company such as Snap Finance. Debt spirals from such irresponsible use are quite common, and you’re almost certainly better off sticking to your regular credit card or savings for these expenses.
9) Pay Attention to Your Credit Limit
Lastly, remember that even if they may be treated separately from your regular credit card purchases, cash advances also reduce your available credit. You want to make sure you have enough remaining credit so that you don’t inadvertently max out your card and dig yourself deeper into debt.
Use Your Credit Card’s Cash Advance Feature Responsibly!
Using a cash advance credit card can be the right thing to do in many circumstances. For instance, if you’re stuck in a heavily cash-based country on a long layover or need cash to cover a medical emergency, the interest on cash advances can be worthwhile.
In most other cases, however, you will want to avoid using this feature if at all possible. Since even a modest sum can ultimately derail your financial stability, if you must take a cash advance, make it a priority to pay it off without delay.
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