A cash advance fee is a fee or charge a credit card holder must pay when he takes a cash advance from his credit card. For example, a person may have a $500 US Dollars (USD) credit line on his credit card. He could go out and purchase goods or services with his credit card, or he could purchase something online. If he used his card to spend $100 USD at a store, this would be considered a charge. If he went to an ATM machine and withdrew $100 USD, however, this would be considered a cash advance, and he would be charged a fee.
Cash advance fees can be expensive. In many cases, a person will incur a two to four percent charge when he takes a cash advance. However, this is not all he’s likely to pay. Some credit card companies charge not only cash advance fees, but also extra interest when a cardholder takes a cash advance. Furthermore, many of the credit card companies that offer grace periods on purchases do not offer them on cash advances. This translates into paying cash advance fees and incurring hefty interest right away.
Some credit card companies don’t set fees based on just a percentage of the cash advance. In some cases, a person may be required to pay both a percentage of the cash advance and a flat fee. For example, he may be charged two percent of his cash advance and $15 USD no matter how much money he requests. Other credit card companies may add either a percentage or a flat fee, charging the consumer whichever amount is highest.
Credit card users should also learn how their credit card companies apply payments when they are considering a cash advance. Payments are often applied to purchases first and cash advances second. This may not be a problem for people who pay their total bills off each month, but those who carry balances may end up paying more in the long run because of the increased interest when a balance is left over from month to month.
With such high cash advance fees and interest, it may be hard to understand why anyone would want to take a cash advance. The fact of the matter is they are tempting because they provide quick access to cash when a person needs it. They can be good for emergency needs, but many financial experts recommend considering them only as a last resort.