Many credit cards have a cash advance option, allowing cardholders to obtain cash or a pre-printed check against their account. The interest rate for cash advances is often higher than that for purchases and there are usually additional cash advance fees of between one and five percent.
After a cardholder takes a cash advance, the cash advance loans interest rate can be increased by the credit card company.
If the credit card has different types of balances, like balance transfer, cash advance, and purchases, any payment is applied to the lowest interest rate balance first, unless more than the minimum payment is made.
Balances with higher rates will continue to increase due to finance charges. Therefore, the cardholder should avoid using the card for purchases until the higher interest rate cash advance is repaid.
Making on-time payments and paying off the cash advance as quickly as possible may cause the credit card company to lower the rate after a period of time. It is never wise to use a cash advance to make up for a lack of income because this can quickly sink you into a financial abyss.
The debt being assumed, and its long-term effects, should be considered.
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