Credit card cash advance offers are a popular way for credit card companies to entice new customers and incentivize existing ones to use their cards more often. These offers allow cardholders to borrow cash from their credit card company and pay it back over time, usually with interest. While they can be convenient, there are a few important things to know about how credit card cash offers work.
How credit card cash offers work
Credit card cash offers typically work in one of two ways: cash advances or balance transfers.
Cash advances are when a cardholder uses their credit card to withdraw cash from an ATM or bank. The amount withdrawn is added to the cardholder’s balance, and they will usually have to pay a fee for the cash advance, as well as a higher interest rate than their regular credit card purchases. Additionally, interest starts accruing immediately on cash advances, meaning there is no grace period like there is for regular purchases.
Balance transfers, on the other hand, allow cardholders to transfer the balance from one credit card to another. This can be a useful way to consolidate debt or take advantage of lower interest rates. Credit card companies will often offer introductory rates, such as 0% interest for a certain period of time, to encourage balance transfers. However, there is typically a balance transfer fee, usually a percentage of the amount transferred.
The pros and cons of credit card cash advance offers
Credit card cash offers can be convenient in certain situations. For example, if you need cash quickly for an emergency expense, a cash advance can be a faster option than applying for a loan. Similarly, balance transfers can be useful for consolidating high-interest debt into a lower-interest account.
However, there are also some downsides to credit card cash offers. As mentioned earlier, cash advances typically have higher interest rates and fees than regular credit card purchases, making them an expensive way to borrow money. Additionally, balance transfers often come with introductory rates that expire after a certain period of time, meaning the interest rate could increase substantially once the promotional period ends.
Another potential downside to credit card cash offers is that they can encourage overspending. Knowing that you have access to cash through your credit card can make it easier to justify impulse purchases or spending beyond your means. This can lead to a cycle of debt that is difficult to escape.
Takeaways
Credit card cash offers can be a useful tool for borrowing money in certain situations, but they should be used with caution. Before taking advantage of a cash advance or balance transfer offer, it’s important to understand the associated fees and interest rates, and to have a plan for paying the borrowed amount back in a timely manner.
As with any financial decision, it’s important to weigh the pros and cons carefully and make an informed choice that aligns with your financial goals.