Did you know that worldwide, cash advances using a Mastercard / Visa credit card are easy but it’s more expensive than using your bank account and hence, should be used only if it’s an absolute necessity?
What is a Cash Advance?
A cash advance on your credit card is an amount of cash borrowed against your credit limit. It’s like withdrawing Money from the ATM with your debit card, except the cash comes from your credit limit, which means you have to pay it back with interest. You can take out a cash advance on your credit card by using your PIN at an ATM.
Cost of a cash advance
Although it is one of the ways to use Mastercard / Visa credit card to maximize their use, cash withdrawals will be treated as cash advance against your existing credit card limit and will incur higher fees and interest rates for repayment. When withdrawing cash from a credit card, you should beware of the following pitfalls:
- Limits: You cannot withdraw your entire credit limit. Card issuers have a cash withdrawal limit when you use a credit card to withdraw cash. Normally, cash withdrawal limits are set by the banks at less than 70% of the credit card limit.
- Fees: Cash withdrawal fees are also collected by banks if you make cash withdrawals. If withdrawing at a banks machine, the fee will be lower than withdrawing from an ATM outside the bank, but overall these fees are quite high, so pay attention before executing the transaction.
- Interest: When you withdraw cash, interest will be charged at that time. This interest rate is also set by the bank, each bank has a different interest rate starting from 4% of the transaction value upward. This accumulated amount of interest payable will be very high if you withdraw larger amounts.
- Payback: When you make a purchase on most credit cards, the credit card issuer won’t start charging interest right away. Cash advances are different. When you withdraw cash on your credit card, you will be charged interest immediately, so the finance charges add up quickly.
- Credit history: If your bank sees you’re using cash advances, you might get flagged as a risky borrower. That’s because they know people use cash advances when they’re desperate. If they see you as risky, you might not be able to get higher lines of credit or good terms with that bank in the future. They might even decide to raise the interest rate on your card going forward or close your account.
Mastercard credit card cash withdrawal is not the ideal recommendation (Internet source)
It is fairly easy to withdraw money from a credit card. As long as you have the right type of account, are in good standing with your payments, and contact your bank to make sure your account is set up properly, it should be no problem. Just remember this type of loan can be quite expensive and should be considered only as a last resort.
In a non-emergency situation, consider borrowing from someone you know. An alternative to a cash advance from a credit card is to have a friend or family member loan you the money, or to get a Overdraft on your Current Account. As long as you have the ability to pay them back, this can be a much lower cost option to withdrawing money from a credit card.
Timo has a Mastercard credit card with many attractive offers and also has an Overdraft facility called Fast cash that let’s you access additional funds when you need it the most.
Find out about Timo’s Credit Card here
Find out about Timo’s Fast cash here
