Cash Advance
A cash advance is when you withdraw cash from your credit card instead of making a purchase. This money is usually subject to high fees and interest rates.
Example #1
Imagine you need cash urgently and use your credit card at an ATM to withdraw $200. This amount is considered a cash advance.
Example #2
If you receive a cash equivalent like casino chips using your credit card, it can also be treated as a cash advance.
Misuse
Misusing cash advances by frequently relying on them can lead to a dangerous cycle of debt. The high fees and interest rates associated with cash advances can quickly accumulate, resulting in financial distress for consumers. It's crucial to avoid using cash advances as a regular source of funds.
Benefits
In emergencies where you have no other options, a cash advance can provide quick access to cash. For example, if you're traveling and lose your wallet, a cash advance from your credit card can help you pay for immediate expenses until you resolve the situation.
Conclusion
Consumers should be cautious when considering cash advances due to their high costs. It's advisable to explore alternative options first before resorting to a cash advance to avoid falling into a cycle of debt.
Related Terms
Credit CardInterest RateDebt Management