When financial difficulties are an issue, many people turn to a credit card cash advance or write out a credit card cheque to help make it through to pay day. The problem is that credit card cash advances charge an even higher APR than normal credit card debt. Does a credit card cash advance help someone to make it to their next wage or is it a source of long term personal debt?

What is a Credit Card Cash Advance?

A credit card cash advance is an opportunity for someone to borrow money against their permitted credit limit. A credit card cash advance doesn’t simply extend to withdrawing money from a cash point machine, it can also be a credit card cheque or a gambling transaction.

Advantages of Credit Card Cash Advances

  • Short term financial difficulties. A credit card cash advance helps people that are struggling with financial difficulties. It becomes possible to make essential payments, such as buying food and paying the rent;
  • Convenience. Applying for a loan or overdraft increase can take time. However, a credit card cash advance simply involves going to a cash point machine or writing out a credit card cheque;
  • Emergency situations. There may be nowhere that will take a credit card once it gets late. A credit card cash advance may help cover an emergency situation, like being able to afford a taxi home when there are no other sources of public transportation available;
  • Bad credit. Having adverse credit means that other sources of credit may not be available to a borrower. Those with an existing credit card can get an advance. Although it is a high APR, the interest rate is still considerably less than many bad credit bank loans or payday loans.

Disadvantages of Credit Card Cash Advances

  • High APR. Getting a cash advance results in the borrower being charged a higher rate of APR than credit card debt. To make matters worse, subsequent repayments pay off the low APR credit card debt before the high APR debt;
  • Additional fees. Most card providers not only charge a high APR on credit card cash advances, but they also impose a further fixed fee for the transaction itself;
  • Too easy. Getting a credit card cash advance can become a little too easy. There is a tendency to turn to a credit card cash advance or write out a credit card cheque each time a person struggles with financial difficulties. This can accrue a lot of high APR interest, not to mention additional fees;
  • Personal debt. After getting a cash advance or using a credit card cheque, a large number of borrowers only make the minimum monthly payment. This serves to exacerbate personal debt problems, particularly for those that seek a credit card cash advance the next month.

A credit card cash advance may offer a lower APR than a payday loan, but it should still only be used in an emergency or by those that have a bad credit rating. People with good credit should seek to get a short term extension to their bank overdraft.