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Is that cash advance really the best option?
How To Save Money On Credit Cards
by Paul Davis
Some credit cards offer a cash advance option. But how good a deal is
this?
Not very. In fact, it can be downright expensive.
Why?
Because every time you use your credit card to withdraw cash, more fees
kick in:
- Cash advances can carry an upfront fee of 2 percent to 4 percent of
the amount advanced.
- The advances have a higher interest rate than regular credit card charges.
- Interest charges begin to mount as soon as the money comes out of the
ATM.
- Many issuers also require you to pay down the balances for purchases
before you pay down the higher-interest cash advance balance.
Here's an example of how these fees kick in:
Assume you bought a television for $500 on your card and then took out
$50 in cash. Even though you pay the $50 back the next day, you still
lose your interest-free period because the credit provider deems you pay
the cash back last.
As a result you will still owe the $50, but you will now only owe $450
on the $500 worth of purchases.
You'll continue to forfeit your interest-free period up until you have
completely paid back the full $550. Any future purchases will still be
ahead of the $50 in the payback line.
The lesson is simple: Avoid using your credit card to withdraw cash
wherever possible. You'll save money as a result!
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Paul Davis is financial writer and contributor to
http://debt-elimination-4u.com
Stop by and pick up your
FREE guide on how to get out of debt now at:
http://debt-elimination-4u.com/get-out-of-debt.htm
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Recommended Frugal Reading
Living On A Dime is known as one of the very best resources of its kind to help you get out of debt without depriving yourself.
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