17 Aug 2020
Have you ever been in a situation where you're strapped for cash? Maybe you're in a small store with a "cash only" sign above its register, or maybe your taxi driver won't accept payment by card. Or maybe you just need a small loan to cover bills until payday comes?
It's times like these that a cash advance can be very tempting – but are cash advances worth it, really?
Simply put, a cash advance is a brief loan on your credit account. Your bank or lending institution can provide you with a couple of options, but the most common type of cash advance is when you make a withdrawal from your credit account at a bank, ATM or even the supermarket. It can also occur when you transfer money from your credit card to another bank account. There is often a limit on how much you can withdraw from your credit account, too.
If you opt for a cash advance loan, these are usually smaller than most other types of loan. For example, you can borrow up to $2,000 with Sunshine Loans.
A cash advance works just like any other advance loan, although some cash advances can be used to purchase a cash equivalent, such as gambling chips and lotto tickets. When applying for a cash advance loan, the application process is quick, though your lender may require you to undergo a credit check.
A cash advance loan will usually come with interest, an establishment fee and monthly fees, or a combination of these.
Cash advance fees will differ depending on the type of loan you take out.
If you take out a cash advance using your credit card, you will either incur a flat fee (usually around $5) or a percentage fee (around 3%) based on how much cash you withdraw. On top of this, interest is charged on the cash you withdraw – quite often, the interest charged is significant. The number can range quite significantly, but the average is around 17%. And unlike purchases on your credit card, which have a time period in which you can pay off the purchase before interest is charged, cash advancement fees begin to accrue interest immediately.
It really does make you wonder: are cash advances worth it?
These are the most common types of cash advances:
Are you still weighing up the consequences of a cash advance? Here's a pros and cons list to help you make up your mind.
To apply for a cash advance loan, you'll need three things: a credit check, employment verification, and documents such as driver's licence or passport. Most cash advance applications can be completed online. To be eligible to apply, you'll need to be aged 18 years or over, earn a regular income, and you must be able to afford to repay the loan.
To apply for an overdraft, you'll need to contact your banking institution.
If you've been wondering "are cash advances worth it?", we hope this article has been helpful in answering this question for you. If you need more financial advice, check out our blog for handy hints and tips.