Explaining The Terminology
Although sometimes used synonymously with "payday loans," cash advances are actually quite unique compared to other borrowing options. The notion of these advances got its start with companies that offered relatively small amounts of money to cardholders at high interest rates. They would then deduct the amount of the advance from the cardholder's available credit line until repaid. Today, however, you do not necessarily have to borrow against a credit line--you can also request an advance against your next paycheck. As we'll explain in what follows, the latter option is usually cheaper and more practical for most borrowers.
Credit cards and advances were once inextricably linked. Companies often entice prospective customers with generous limits or fairly modest interest rates, which is in large part how the phenomenon began. In most cases, they charge fees for each advance that range from one to four percent of the total amount borrowed. Additionally, since the money is processed through an ATM machine, the cardholder must also pay the fees associated with that particular machine. Because of the risky nature of the transaction, issuers also charge much higher interest rates.
If you wish to take out money against an existing credit line, you will need to have a credit card with available funds. Not all cards offer this as an option, so you may want to call your issuer or check your cardholder agreement for details. On cards that do offer the option, issuers typically place a limit on the maximum amount of cash a cardholder may obtain. Expect the advance limit to be far smaller than the total limit—25 percent of the total limit is most common. For instance, if your credit card has a $2,000 limit, your limit would probably be around $500, although this varies by cardholder and company. Most cards that provide cash advances are only available to consumers with excellent or above-average credit scores.
The implications can be potentially devastating if the option is misused or overused. With most credit cards, the issuer offers no grace period on the accumulation of interest on balances. In other words, the already high interest rate that the creditor charges for the advance will kick in the moment you take the money out of the ATM and continue accruing until the balance and fees are paid in full.
Because of the extraordinary expense associated with this type of loan, many cardholders rack up large amounts of debt in a relatively short period of time and then cannot keep up with the interest rates. Falling behind on payments will, of course, negatively impact your credit score, which in turn will make it harder to get credit in the future. On the bright side, however, recent credit card reform now requires issuers to apply your payments to the balance with the highest interest rate. That is, your money will be applied typically to your balance first then to your purchase balance, provided that your issuer charges a lower interest rate for purchases. In contrast to credit card cash advance loans, paycheck or payday loans usually do not involve any credit-related matters because the money is withdrawn from your upcoming paycheck, not a credit line.
Request a Cash Advance
Now that you understand how these things work, you are ready to take the next step and request a free quote from one of our lending partners. To do so, simply click on the form provided at the top of the page at any time. Enter just a few pieces of information, and you will be well on your way to receiving an affordable, fast loan. Without worrying about your credit history or past financial challenges, you can easily qualify. Simply input your requested amount into the field below.