The best credit cards can be powerful tools in managing your money. They can help lengthen the value of services and products you want by getting them before you pay for them. They can also minimize the need of cash or check when you are away from home. You will be able to do business over the phone, by mail or using Internet.

This was 8% more than the previous year. Those that use credit cards are seeing how easy it is to use them instead of being disciplined and using credit unions or banks. Those that are abusing this tool are in danger of ruining their credit score and ending up with a bad credit history. This makes it impossible for credit card companies to offer them low interest credit cards, or no fee credit cards.

Of course, the credit card-issuing companies are more than eager to loan cash; it is a useful service for their clients after all. Always looking for a new way to collect fees, they are also raising their interest rates and fees specifically for cash advances. This is usually explained in the fine print that is written on your monthly statement, but not all of it. It is best if this information is made readily available on the application for credit cards. It’s always not a bad idea to phone customer service and ask what the fees are. No doubt you would do the same if you wanted to know the conditions of a bank and credit union loan before you sign.

Exactly How Much Does Cash Cost?

When using your cash rewards credit cards to buy ‘non-consumable’ items such as CDs, shoes, etc., you will use these products for several years and pay for them much later. However, when you use a cash advance on your credit card to pay for everyday purchases such as groceries & gas, you will end up paying a lot more for the items.

As an example, say you need to borrow $500 from a Visa credit card. You will have to pay 3% of that amount as an upfront transaction fee. Your APR will be 19.9%. So, if you decide to pay off that money in the next four months, your interest and fees for that $500 will be $35.88. That is more than 7% of the amount of money you borrowed. Whereas you pay your visa credit card off over 8 months, you well give the bank $53.24 or 11% of the loan amount.

In the small print, it states that most payments you have to make will first be applied to lower interest charge purchases and only after that they will start to get rid of your debt for the higher interest in borrowing cash. That means that when your credit card balance is $1000 and includes a $500 cash advance and you only pay $200 a month, it will take three whole months before your payments will start to cover that cash that you borrowed on your visa credit card. That’s three more months of 19.9% charges on your purchase.

Credit card companies charge so much more for cash than goods because cash transaction requires delivering a product from the credit card company. Their costs are higher. It is more costly to process and those who frequently use cash advances are a high-risk group that falls behind in the loan repayments.

If you are planning on using your low interest credit cards for cash advances, then it is important that you know in advance how this will affect the interest rate on your card. Information about cash advances should be printed directly on your application for a credit card.

Planning Ahead Can Increase Your Financial Power

You must plan ahead if you wish to use the cash advance feature on even the best credit cards. Make sure that you understand the rules and fees. Also, you can save on interest charges if have a plan and stick with it to pay back the money, interest and additional fees. Even credit banks will try to make you understand you that this service should only be used when necessary and there should be a disciplined repayment schedule.

The more disciplined you are in how you spend, save and invest, the more your money will grow. Thus you will create assets that can serve as foundation stones of wealth. If you must use cash advance, look at it as a time to look for a better way for making and spending money. Once you have that strategy in place, the next time you decided to get cash, you won’t use a low interest credit card but a debit card.

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