How to Manage Your Cash Advance

shutterstock_139858978Cash advances are a common loan option typically used for short-term financing purposes. They can be used to fund a purchase, to cover household expenses or bills, or for any other expense or purpose. Regardless of how you use your cash advance, it a good idea take time to understand the terms and conditions as cash advances differ slightly from other types of loans and financing products.

Understanding cash advances

A cash advance is a flexible and convenient way to use your credit card to pay for purchases and expenses. Instead of charging directly on the card for each expenditure item, you withdraw the cash from the card. The withdrawal amount is charged to your credit card and counted in your limit.

An alternative to this type of cash advance is the payday loan cash advance, which may be credited to a pre-paid card for you to withdraw. Note that while credit card charges usually come with an interest-free period, interest is charged on cash advances from the very first day, and the interest rate is usually higher than the standard interest rate that applies to your credit card.

Understand your obligations

Be clear about your obligations before you take out the cash advance. Repayment periods, interest rates, and fees and charges are some of the things to be aware of.

Read the terms and conditions

It’s a good idea to familiarise yourself with the terms and conditions so that you are aware of any other fees and charges you are responsible for. For example, you may be charged a withdrawal fee for taking out the cash, or the ATM itself may charge an additional fee. If you don’t understand a term or condition, contact your lender for more information.

Review cash advance limit

Cash advance limits can differ from the credit limit on the credit card, so check with the lender about your actual cash advance limit. Usually the cash advance limit is lower, especially if you are making withdraws from an ATM.

Have a repayment plan

As with any loan, set up a plan in advance to manage your repayments. Review the minimum repayments for each month and adjust your budget to ensure that you can make these repayments. Where possible, pay much more than the minimum repayments, so that you can pay off your cash advance more quickly and avoid unnecessary interest charges.

Applying for a cash advance

Cash advances usually come with credit cards and there is usually no need to formally apply for it. The borrower can simply choose to withdraw funds from an ATM machine.

As mentioned above, some lenders offer payday cash advances that work the same way as those associated with traditional credit cards. These can be deposited into a prepaid card, which you can then use to withdraw the funds. These payday cash advances can be deposited into your prepaid card on the same day or within hours of your application being approved. To apply for these types of cash advances, you usually need to demonstrate a place of residence, employment, and income (or ability to repay) in addition to identity.

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