Purchases vs. Cash Advances - Credit Card Gotchas

This blog is the third of several in which I will address the many gotchas the Credit Card industry uses to its advantage to add to its billions of dollars in revenue each year. What you don’t know or don’t understand about Cash Advances on your credit card will cost you money, so read these, and then study the fine print in your contract.

Purchases vs. Cash Advances – Have you ever received those “convenient” checks in the mail from your credit card company? Before you write one, be sure to read the fine print. Those credit card checks are usually treated as cash advances! Card issuers tout these checks as an easy way to pay off bills or acquire extra spending money. While they may be convenient, that convenience comes at a price. The charge on cash advances is not the same as the regular interest rate on charge purchases. It is usually significantly higher and there is typically no grace period (period of time before interest charges begin). While your regular rate may be 17 to 18%, your cash advance rate can be 20 to 25% and the interest charge begins at the time of the advance. Some creditors charge a flat fee for cash advances, regardless of the amount of the advance and some even charge a combination of the two: flat fee plus interest.
Be sure to read your credit card statement each month.

You may occasionally find that a charge that you considered a “purchase” was actually treated as a cash advance by the credit card company. If you use an ATM machine for a cash advance, there can be an additional charge by the ATM’s bank.

Another gotcha occurs when you make a payment toward your balance. Most issuers apply payments to purchases before they apply payments to cash. If you carry a balance on your card, this means that you will continue to pay that higher interest rate on your cash advances until you pay off your entire balance.

And there is one more legal gotcha on cash advances: If you get into debt and have to consider bankruptcy, cash advances are exempt from Chapter 7 discharge of debts. You will still have to pay back any cash advances.

Becoming dependent on cash advances to "make ends meet" can be a sign of serious debt problems.

Are You in Credit Card Trouble?

If you have credit card debt over $5,000, are struggling to make the minimum payments each month, take out new cards to help pay off old card balances, or seriously thought you might need to file for bankruptcy, you may qualify for Debt Settlement. You can obtain a free debt consultation from Credit Card Relief™ by clicking here. They can help you determine the best solution for getting you free of debt. For more information, read my blog dated September 29, 2006. You owe it to yourself to check out your options for eliminating your debt.