Disadvantages of Cash Advances
and Credit Card Checks
Often times credit card companies will offer some enticing terms and conditions to get you to sign up for their cards and get you on their hook. But most people don't need a hook, as they're eager to accept credit from whoever will offer it.
For example, you may be allowed cash advances to withdraw cash from your bank account or an ATM. Additionally, you may also receive credit card checks, an option you can use in addition to your credit cards. But you should use them sparingly, as there are major reasons to limit or even avoid use of these options altogether. Below are some of the more pertinent ones.
It Says You're Financially Weak
Using a credit card check or accepting cash advances implies that you truly
need the money, since you're not just using a credit card for convenience. This signals
the credit card companies that you're someone who shouldn't be given a high credit limit,
since you won't be able to clear any current debt anytime soon.
There are Heavy Usage Fees
When you
use credit card checks you often give up interest-free periods offered by
credit card companies looking to make you a customer (which can be up to
two months), meaning that you start paying interest on the money literally from
the minute you spend it. To make things worse, most cards will also charge a fee
each time you use cash advances or credit card checks, in addition to ATM
fees.
These fees add up quickly, but are completely avoidable by
simply not using the checks, unless there is clear and compelling evidence that
these type fees won't apply if you use them.
Be Wary of Hitting Advance
Limits
If you become dependent on cash advances and credit card checks there is a
good chance that you could eventually run into an advance limit.
Most credit card companies have limits on how much of your balance can be taken in cash advances and how much must be in purchases. So, to avoid inadvertently hitting these limits, be aware of them before you use cash advances heavily.
Try to Use Just your Credit
Cards
Instead of using cash advances and credit card checks to pay for small things and ending up
taking advances or using checks to pay for bigger things, attempt to do it the
other way around. If you fall into a situation where you're relying on advances,
start using your card for smaller things where you wouldn't usually bother. This
way you can avoid taking the advances and can pay less interest. Be conscious
about your spending, and spend wisely.
Further, there are fortunately very few bills now that must be paid for by check, so you should be able to limit credit card checks to a minimum. If you're willing to call them up and wait in their queue for a while, the chances are you can get them to accept a credit card payment just by giving them your credit card number.
Understand Credit Card Debt Repayment
Systems
One more tricky thing about credit cards is their system for debt repayment.
The system works so that your payments pay off the lowest interest money first,
leaving your heavier interest debt intact until you fully pay off your card.
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