Cash Advance Card

When to Use a Cash Development

While a credit card will pay for most things these days there are always times that call for excellent ancient fashioned cash. Most of the time you would probably door cash from an ATM using a cash card linked directly to your bank account. But, if your bank account funds are running low or the ATM in the location you are in won’t accept your card then an option to door cash might be using your credit card to get a cash development via an ATM machine. Some banks even offer credit card checks which can be used to pay for items but are treated like a cash development, not a normal credit card buy.

Should you be concerned about that?

There’s no question about it, credit card cash advances can act as a very valuable feature. Any traveler who finds himself or herself wanting for cash in a foreign country will really appreciate the relief it gives. Your credit card allows you to get a cash development anywhere around the world, from locations as convenient as the ubiquitous ATM machine.

Before you start making credit card cash advances there are things you need to know. Typically, cash advances are going to be more expensive to you than making the buy directly on your credit card. Consider the following:

Finance charge: There are cards that bend the policy but you will find a cash development with most cards attract a higher APR than buy rates. This is very typical even with low interest credit cards. For example, a low interest credit card from an Australian bank has a cash development rate of 18.75 percent (as at March 12, 2008), while the buy rate is 12.99 percent. Be aware that the difference in interest rates can be very significant.

There is a reason for this. The credit card issuer earns some income from your buys because merchants pay fees to process and receive payments for the transactions. A merchant is not involved in a cash development transaction, so the credit card issuer does not earn fees.

Grace period: Credit card issuers normally grant a grace period on buys, and charge interest on these only if you don’t pay off the amount when it falls due. A cash development does not get such grace period, and interest is charged from day one. A $500 credit card buy could cost nothing in interest if you paid the bill in full on its due date; a $500 cash development at 18 percent APR paid in full after one month would require you to pay $7.50 interest.

Special fee: Card issuers often charge a cash development transaction fee, publicized as a percentage of the cash development made. Usually, the fee ranges from 2 to 3 percent, but with a minimum fee (e.g. $10). In the example above, you would pay $10-$15 (2-3 percent) as transaction fee on the $500 cash development.

In the examples above, the $500 credit buy would not cost anything in interest or fees, but the $500 cash development would cost a whole of $17.50-$22.50.

That is the underside line: credit card cash advances are more expensive than credit buys. The message is that cash advances should be used judiciously and only in emergency situations.

About the Author

Cash Development article by Richard Greenwood is credit card offers website Click4Credit. The site is part of The Click 4 Group which compares additional products such as high interest savings offers.

Merchant Credit Card Development, Merchant Cash Development – MerchantCashAdvance.com