A cash advance, sometimes referred to as credit card advance is when one borrow money against the limit of his credit card. The credit card advance acts as a short term loan. To get cash advance loan, you need to withdraw money from the ATM using your credit card (the pin for your credit card is connected to it). The next step is to ask for help from the bank teller who will complete everything for you and from there you can write a check to anyone who you wish, you can even write a check for yourself.
Each credit card has its own cash advance limit. For example, your credit card maybe having a limit of 1200 dollars but the cash advance limit is 200 dollars while the credit card of your friend might be having a credit card limit of 1000 dollars but his cash advance limit is 250 dollars. The good thing about cash advance is that you get the money as soon as possible, in most cases immediately. But should you take it? Or should you avoid it? If asked I will prefer online loans such as Bugis Credit to cash advance. I think cash advance or sometimes called payday loans (there is a small difference though) should be your last resort when you really don’t have another option. Here are some of the reasons why you should avoid cash advance as well as payday loans.
- Cash advance and payday loans are very expensive.
Okay, the cash advance loans are meant to be short term and a small amount which you can be able to repay within the shortest time possible. But if you look at the bigger picture, this loans are incredibly expensive. Sometimes the interest can even go up to 36 percent! Think about it, you borrow some 100 dollars on a cash advance loan and you are supposed to repay it as 115 dollars in 10 days. How does that sound? What it sounds like is that it is an annual interest rate of up to 400 percent! Why would you want to go for a cash advance loan if you have other alternatives? Even though cash advance loans are easy money you should know that accepting the payday loans comes at very high price. I strongly recommend you avoid this loans as much as you can and thank me later. If that is not an enough reason to make you stop, continue reading.
- It is possible to get stuck in a repeat cycle.
The world has changed a lot and you will agree with me that a lot of people out there just care about themselves and no one else. In the loan business it is no different. There are good payday lenders and just like in anything, there are bad payday loans lenders. The reputable operators try to prevent their customers from being stuck in repetitive cycle by maintaining a database of their clients to help prevent the rollovers. However about 76 percent of the cash advance and payday loans are usually pay off to other old payday loans. The center of responsible lending research reported that even though the cash advance loans are supposed to be paid within the shortest time possible, probably two weeks, on an average a borrower can stay with a loan for up to 6 months. And when the day comes when you are supposed to pay the loan, you either pay it or you roll over the loan for 2 more weeks. You can imagine the money one is going to pay up by the end of the whole thing.
- The debt grows at a very fast rate.
If you take a cash advance loan you might end up paying even 10 times of the money you originally borrowed! In just a year the debt will have grown and you will be required to repay 4 times of the amount you borrowed. So you can imagine how much you will have to repay if you stay with the loan for up to 5 years. Just one small mistake can make you have a lifelong debt.
- Payday loans and cash advance loans are way too easy.
If you have ever applied for a loan on banking institutions, then you have an idea of what am trying to say here. Sometimes your loan takes even days to get processed and when it is processed you will have made a plan on how to use the cash in the most appropriate way. But for a payday and cash advance loan, you can even get the loan without even thinking about it. You are just out there with your buddies having some lunch and probably you are less 30 dollars and you just jump into a cash advance loan without thinking about it and even before you can reconsider, the money is already with you. There is not time to plan how to spend the cash and you don’t even get the time to consider other options. Even if you change your mind after you have changed your mind that’s too bad because you will still have to pay the money with interest. There is no going back once you have signed the papers.
- Many payday loan companies often require to access your bank account.
These companies will take money directly from your bank! Once it is linked with them, you don’t even have to write a check in order to pay them back. They will make the work “easier” for you, they will just take the money from the bank account when it is time. And if you your balance has grown in a way that you can just afford your living expenses, they will still keep on trying to get money from your bank account and because of that you will get bank overdrafts too!