Most credit cards provide cash advances. However, there are many hidden costs that can be very expensive. When you prepay cash, you will be charged 3% of the standard fee. In addition, prepaid cash rates will apply. This ratio is usually 5% to 15% higher than the standard APR. Very few credit cards offer a cash advance rate of 0% within one year, but when the introduction period ends, the annual interest rate still rises 20 times.
If you plan to pay cash in advance instead of getting a 0% interest card, there are many things to consider. Here are just a few expensive cash advance plans and some possible solutions:
1. ) Suppose you have a $1,000 balance on your credit card, and you have advanced 1000 USD in cash. Two months later, you pay $1,000 to the bill. Guess what? Your interest rate is still astronomical prepaid rate, not your normal rate. why? Because credit card companies use your payment for lower interest balances before higher interest balances. This means that you will have to pay off your full $2,000 balance to avoid paying 29% interest on your credit card.
One way to avoid this is to use a credit card with no balance or new credit card. Both of these conditions will prevent you from being slammed by cash advance interest rates in the previous balance.
2. ) Now suppose you use a new credit card to withdraw $1,000 in cash but cannot pay immediately. During the course of a year, you pay $1,000 in cash at an interest rate of $29 may generate $300 or more in interest. This is an expensive 1,000 dollars.
One way to avoid this is to withdraw cash from a credit card and then convert the balance into a 0% balance transfer credit card. This not only saves one year's interest expense, but also provides a lower interest rate after the introduction period of 0%.
Cash advances are expensive regardless of how you look at cash. However, there are ways to reduce the hidden costs of these transactions. Looking for a credit card that offers a 0% cash advance rate is ultimately the best way to avoid these costs, but even without 0%, smart consumers can be spared from credit card hell.
Orignal From: Cash Advance Credit Card
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