We are approaching the holiday season, some consumer’s savings may have fallen below their expectations for purchasing holiday gifts or planning trips to visit family. If you are in the midst of creating a strategy to make things happen by using your credit cards for purchases or making cash advances, perhaps even to pay bills. STOP!!! If this sounds like a plan that you are entertaining, my suggestion is that you avoid doing a cash advance. You could pay MUCH MORE than the gifts or trips that you have planned for. This could become a serious “Money Leak”. Consider the cost before you swipe!
Out of all the credit card fees, the ones associated (CardHub, Wei 2014) with cash advances are some of the most exorbitant – and this applies to both types. Many individuals are fooled by their convenient facade but end up paying the price – quite literally – when their credit card bill arrives a few weeks later with an additional $10 to $50 tacked on in fees.
Depending on which bank issues your card, one of the three following methods will be used to calculate your cash advance fee:
- The first method is a flat rate fee that will be assessed irrespective of how much money you withdraw. For many banks, this charge tends to hover around $10. Therefore, if you withdraw $250, you will have to pay $260.
- The second method is to charge a percentage of the money you withdraw – usually between 2%-5% – as a fee. In this scenario, if you withdraw $250, your fee could reach as high as $12.50.
- The third method, which is the most common, is a combination of the first two. Many issuers charge either a minimum flat rate or a percentage of the amount withdrawn – whichever is higher. Let’s say the fee percentage was 5% and the minimum rate was $10. If you withdrew $50, you wouldn’t pay a percentage fee of $2.50 – you would pay $10.
Cash advance fees have been rising steadily over the last few years. According to CardHub’s latest Credit Card Landscape Report, the average cash advance fee is now the maximum of 3.9% or $12.41.
It is also important to note that doing a cash advance at an ATM will likely result in you being assessed an ATM owner surcharge in addition to the cash advance fee and high interest rates charged by your credit card. These fees range between $2 and $5, though they are the lowest of the ones we’ve discussed, they can still add up.
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Great information in a timely manner. Thanks
Thanks for your response Gwen. The difference in card purchase interest rates and cash advance interest rates can be tricky. Sometimes consumers assume that they are both the same and many cases the cash advance rate is higher and carries other fees. Easy access, but not always easy to understand.
Hey this is Great! Thanks Christine!
You’re welcome….thank you for your comment.