When receiving a credit card, consumers almost never look at the credit card agreement. It takes a long time to read and understand the fine print; the print is not really fine, but small. And the wording can be confusing, for everyone, including a lawyer.
In general, credit card companies allow consumers to take a “cash advance” against the card.
Usually, there is a separate borrowing limit for cash advances, as compared to purchases.
The website www.bankrate.com has an article on the “Cost of cash advances.” Everyone should read the article.
There are four bad reasons to get a cash advance:
- Immediate processing fee for the advance – normally 2 to 4% of the amount of the advance
- Typically, the rates are much higher for cash advances than purchases, commonly over 20% per year
- There is no grace period as with purchases – interest starts from the day you get the cash advance (with purchases, if you pay off the balance in the first billing cycle, you avoid interest charges)
- Payments on account are first applied to purchases before cash advances. You need to fully pay off your balance for purchases, before any money is applied to the cash advance balance. As an example, if you have a $10,000 purchase balance at 10%, and a cash advance balance of $5,000 at 18% interest per year, you need to pay off the $10,000 purchase balance, before you get credit for payments to the cash advance balance.
Cash advances are to be avoided, at all times.
Attorney Robert M. Singer
Law Offices of Robert M. Singer, LLC
2572 Whitney Avenue
Hamden, CT 06518
203-248-8278