Emergency Cash Advances: A Sting to The Piggy Bank
Low on cash or in need of a little cash may mean cash advances for emergency. But beware of how you borrow. You can easily end up paying twice the sum and interest rates from a friendly banker with up to 910% interest from the convenience of cash advance loan dealers.
Low on cash or in need of a little cash may mean cash advances for emergency. But beware of how you borrow. You can easily end up paying twice the sum and interest rates from a friendly banker with up to 910% interest from the convenience of cash advance loan dealers.
Most people are caught in the habit of cash advances from credit or debit cards through withdrawals from ATMs or bank counters. Alternatively they take cash back in supermarket or drug store checkout lines. Now US post offices too often offer a cash back facility. However the average person overlooks the fine print on the bank literature or monthly statement.
–A huge fee of up to 2%-5% of the advance amount, apart from a $5-$10 transaction fee.
–Cash advance has an interest rate almost higher than the rate for credit card purchases, mostly up to 24%.
–Cash advances offer no grace period which means that from the moment you get the cash, your time starts while for the average credit card the period is 20 to 25 days.
Biggest rip-off: When it comes to monthly payments, banks mostly require you to first pay off your balance on purchases before payoffs for cash advances. This leaves you with the higher interest charges for ages.
Consumer advocates explain that a bank fee may be 2% on cash advances but not less than $10. Taking a $20 advance means an immediate charge of 19.99% interest on $30, not just the $20 borrowed. Bank fees have undoubtedly soared mainly due to the ignorance or laziness of consumers who think that getting ATM cash advance on their cards is merely convenience. In reality usually two fees are levied when another institution’s machine is used. The law requires banks to disclose all fees and charges to customers who are usually not very concerned.
There are further complications. A bank may offer up to five or six different credit cards with different brand names and different basic annual percentage rates (based on the customer’s credit history), cash advance fees and rates and delinquency rates for late payments. That’s a lot to scrutinize.
Take the example of Citibank’s string of different credit cards over the years. Its Silver Classic card has had an APR of 9.9%-24.99%, with cash advances charged 19.99% plus a 3% fee and $5 minimum. Providian National Bank’s GetSmart Visa Platinum card came with a 1.9% introductory rate, shooting up to 9.9% with a cash advance fee of 21.99% in addition to a 3% transaction fee with a $5 minimum. 19.99% has been the delinquency rate. However another Providian card, GetSmart Visa Classic has a cash advance fee of 23.99% and delinquency rate as high as 27.99%.
My advice!
In the event of a need for emergency cash of about 50 bucks, a supermarket is preferable to a bank. There is no transaction fee or interest charge. Some stores are directly online enabling money to be debited immediately from your account. Others take about two to four days. Transactions should be immediately noted in your checkbook.
–Ask for and study your bank’s fee disclosure document.
–Use a debit card instead of a credit card for cash advances to improve spending discipline.
–Cash advances should be repaid at the earliest. Remember that card issuers credit purchase payments first.
–Never go overboard on cash advances, as you’ll have to pay dearly.
–Always avoid money through payday loans. The annual rate may be as shocking as 182 to 910% as revealed in a study by Consumer Federation of America.
Usually the greatest setbacks for a consumer choosing to avail cash advance are the finance or interest charges. Cash advances have interest rates significantly higher than that of normal purchases. Normal rates for cash advances are between 20 and 25%. In contrast, the average purchase rate for a standard credit card may vary from 15.88% to 17.30% according to BankRate.com. A few issuers however may charge purchases and cash advances at the same rate.
Categories: loan Tags: Emergency Cash Advances, Piggy Bank