There are about 579 million credit cards in circulation in the US and 183 million people use them for their transactions. $4.442 million was spent by these people in 2014 during the good periods of the economy. However, there are still instances wherein credit cards aren’t exactly the best choice; in some cases, only cash can be used to complete the transaction.
For example, providers of auto repair, home rental, restaurant, and lawn maintenance services prefer cash over credit card payments. Now, there will be instances when you will run out of cash from your wallet and you have something that needs to be paid urgently. What should you do?
This is where cash advance loans will prove to be very useful
Fundamentally, this falls under the category of short-term loans. It is perfect when cash is urgently needed and credits cards won’t work. During times of emergencies, cash advance loans provide a quick form of solution. This type of loan can also be used when your bank account is almost empty and payday is still way ahead. One of the most common uses of cash advance loans is in bills payment.
It isn’t hard to find lenders who offer cash advance loans. Banking institutions as well as ATM machines can be sources of cash advance loan money. Those who are in desperate situations can go to payday loan lenders.
However, while it is easy to get cash through payday loans, you must remember that there are pros and cons. For starters, this isn’t recommended for borrowers who intend to take out loans regularly or for those who aren’t sure that they can pay back the money owed. Payday loans are ideal only as a short-term solution. They aren’t meant to regularly supplement your income.
Cash from Credit Card
The irony with the use of cash advance loans when credit cards aren’t accepted is this: credit cards are required during the process of obtaining loan approval from a bank or lender. The card is presented to the lender and cash is granted based on the credit line that you have. Note that your credit line is dependent on your actual purchases and the balance that you have on your account. ATM cards can be used too and the same procedures are followed. You’ll need to present your ATM card and its PIN to the lender.
Many people also make the wrong assumption that cash advance loans are part of the regular services of a bank. While banking institutions could offer this type of loan, they charge a lot for it. Service and interest rates are known to be huge for cash advance loans.
If badly needed, cash advance loans can be accessed through payday lenders. These lenders usually make it a usual requirement for borrowers to sign contracts and issue personal checks. They also charge service fees and other types of fees as deemed necessary by the transacting officers.
A borrower should expect the fees charged by these lenders to be quite high. It is a must that borrowers go through the contract before signing it. Things such as the APR, loan term, payment schedules, and charges should be examined too.
The last option for those who need cash advance is the use of convenience checks. These look similar to the regular checks that we use. However, it is different because it comes with the credit card statement that an individual regularly receives. There is an invitation for the credit card owner to use this slip of paper to get cash. There is no doubt that the use of these checks is one of the fastest and most convenient ways of getting cash advances. The warning here though is that an individual should expect the same fees being charged as if he or she is still using an ATM or bank lending services.
There Are Huge Fees for Cash Advance Loans
Cash advance loans are undoubtedly convenient. However, there are many people who discourage others to take out such loans. The biggest reason being pointed here is the huge interest rates and service fees that come with it. A 5% transaction fee is automatically computed from the amount being loaned. This equates to $25 if a borrower takes out a loan of $500. It has been observed that interest rate charged by lenders is six percent above the usual rates charged by credit card companies. Generally, cash advance loan lenders charge 24% in terms of interest on any amount approved. This is automatically charged from the amount that a borrower will receive.
This differs from credit card purchase interest which is given a grace period of 30 days. This will of course change based on the amount being taken out and the payment period agreed upon. If you will use an ATM or bank facilities that is outside of your network, a fee ranging from $2 – $5 will be charged too.
Typically, payday lending agencies will charge $15 for every $100 dollars released for cash advance loan applications. This equates to an APR of 391%.
Other Options for Those Who Need Quick Cash
There are many options or alternatives for those who are interested in applying for cash advance loans and you should absolutely exhaust all other options before you even try cash advance loans. The nearly exorbitant interest rates and the fees are the reasons that only a small percentage of credit card holders in the US for 2014 — 4% to be exact actually used the cash advance service offered to them. Those who took out loans usually limited the amount they took to $90.90. For starters, you can sell something you don’t really need for some extra cash such as collectibles and extra gadgets. You can also moonlight as a freelancer online, or take a second job that doesn’t require too many hours.
How to Ensure that the Need for Cash Advance Loans Never Arises
Establishment and use of emergency funds – Setting aside a certain percentage of income for emergency funds is a good way of ensuring that money will be available when urgent needs arise.
Wise shopping – Shop using your credit card. Make sure that the establishment accepts credit cards for payments of purchases.
Control buying impulses – Before buying anything, think twice about it. It will be good to avoid unnecessary purchases.