Cash advance? Think ahead
That service from credit cards is best kept as a last resort. Fees and interest rates can add up quickly.
You’re on vacation and getting ready to use your credit card for a cash advance.
Stop right there and ask yourself whether it’s an emergency that can be resolved another way.
That’s because the fees and interest rates charged on such advances can add up, said Matt Schulz, senior industry analyst at CreditCards.com, online marketplace for credit cards.
Using a credit card abroad for purchases can incur a foreign transaction fee, which can add 5% or more to your purchase. Alist of those cardscanbefoundatCreditCard.com’s site, www.lat.ms/1cxWt6b, and at Nerd Wallet’s site, www.lat.ms/14YpGiV.
Not every transaction can be handled with a credit card, andif you’re out of cash and don’t, for some reason, have ad ebit cardon you, you may be tempted to use the cash advance feature.
“A cash advance is basically just using your credit card to withdraw money from an ATM,” said Schulz, whose company released a report Wednesday on cash advance cards ( www.lat.ms/1dMBOwK ). “That’s the most typical example of when someone would do a cash advance.”
But, he added, “That comes with fees, and it comes with a high interest rate, and those two things generally make it a pretty bad choice for somebody under normal circumstances.”
Howhigh? Some cash advances charge 23.5% interest — “8.5% higher than the average credit card, which is 15%,” Schulz said, “a big difference.” The report said First Premier Bank charged 36% on advances.
The other catch: Interest begins accruing immediately, unlike a regular credit card purchase in which you generally have a grace period, depending on the terms of the card. Because you won’t be home, you may not think to pay it off immediately.
All in all, a cash advance isn’t your best financial move unless circumstances warrant. We often urge people to carry several financial tools when traveling, but that ought to be the last one you take out of that tool chest.
USING CREDIT CARDS is often helpful in travel, but be careful about using them for cash advances.