A cash advance is basically when you are able to withdraw cash with your credit card from the ATM machine. It is an option lots of banks offer by giving you blank cheques along with your billing papers. Even though this may sound very convenient and easy, you should be wary of some things. Before you decide to take a cash advance make sure you are aware of everything it comes with prior to signing up for it. So be cautious of the fine print and get facts straight about cash advance canada.
APRs on credit cards for cash advances is usually a lot higher that the normal credit card APR, meaning that you will be spending way more to access that cash. For example, to use your card normally for daily expenses if the APR is 14.5%, for a cash advance it would be more than 26%. So this will be a very costly option in the long run, with the added interest expense.
Credit cards will usually charge you a fee when you use the cash advance option, which is standard and normal. The card will charge a fee either up front or later when you have to repay your cash advance, this will be dependent on the credit card company terms and conditions. But if you choose to pay off the balance, you will be able to dodge the high interest rates.
If you pay your minimum balance that is due every month, the payment will be applied to your lowest APR balance first. The payments will be applied to higher APR balances only when your lower ones have been paid off. So essentially, if you take out a cash advance on a lower APR balance, it can take you a lot longer to pay off your higher APR balance.
This may sound very confusing, so we will try to explain it with an example. If you have a credit card that has an APR of 16% for normal purchases and an APR of 21% for cash advances and you decide to shop for $100 and take a cash advance of $100. When your monthly statement comes in, you pay the minimum of, say, $50 and what the company will do is they will use this balance towards the lower APR balances. What this means is that the money has been used to clear the balance that you created with your shopping not your cash advance. And you will still be left with the $100 balance that you took out for your cash advance.
What you need to keep in mind is that every cent that you pay beyond the minimum required to be paid will go towards your more expensive debt.
Hopefully, this article will have helped clear some things up for you. We understand that sometimes people get bound and we might get forced into taking such measure but it is always important to know what you are signing up for.
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