Have you ever taken a cash advance on your credit cards? Are you thinking about it?

If you are thinking/planning on taking a cash advance from your personal credit card, you should think of the pros and cons, then go from there.

What is a Credit Card Cash Advance?

A Credit Card Cash Advance allows you to obtain a cash loan using your credit card. You would take your credit card to an ATM, and withdraw the money using your PIN number, rather than goods or services.

What are the fees?

• Cash Advance fee- It depends on the card issuer, it is usually 5% or $10, whichever one is greater. (Capital One Venture charges 3%) For example, if you take a cash advance for $1000, you will pay a fee of $50.

• Higher Interest Rate- They also charge a separate APR for cash advance which is usually higher than your purchase APR. Let’s say you already have a balance of $1500 on your credit card where your APR was 18%, you then take a $1000 cash advance, and the APR is 26%. You will have to pay two separate interests until the full balance ($2500) is paid off. Do not forget that you will pay interest on the actual cash advance fee too.

• ATM Fee- There is also the ATM fee. If you choose to withdraw the money from an ATM other than your bank, you will pay that bank and your card issuer’s fees.

What are the pros and cons?

Pros

• Extremely easy to get and super-fast cash access

• No credit checks

Cons

• Accrue interest from day one with no grace period

• Extremely high APR and fees

• Repayment often results in a payment that would be a triple digit APR

• Credit card cash advances do not earn rewards points.

***If you have a PenFed Platinum Rewards Visa, they offer no fee and a lower APR for cash advances, therefore, it’ll make the cash advance much less onerous.

What are other options to consider before taking a cash advance?

• Personal Loan (not a payday loan)- If you have a good relationship with your bank and a good credit report/scores, the interest rates are usually lower than cash advances and payday loans. Yes, the process is a bit longer, they will be a credit check, BUT it will be a lot cheaper.

• Credit Card- Apply for a credit card with a low to 0% interest offer, use it and pay it off.

What to remember about cash advance?

1. It is usually a percentage of your overall credit line.

2. Interest charges start accruing right away.

3. Understand the fees and consider all your options.

With, be sure to check all your other options prior to taking a cash advance from your credit cards. In many cases, there are less expensive alternatives to cash advances.