Taking a cash advance is an ideal solution if you are facing a financial emergency and need quick cash. Most people subscribe to this loan in the short term because it offers a quick fix to their financial dilemma. One of the important things to remember is that this perfect solution has a high price. You can have serious financial problems if you rely on cash advances.
Danger 1: exorbitant fees
Credit card companies encourage cash advances to get quick access to cash in an emergency. These transactions are often accompanied by convenience fees. In addition to these fees, you may also have to pay ATM fees when you withdraw money from an off-grid unit. Every aspect of the process has costs, which makes it expensive.
Danger 2: Interest Rates
The high interest rates in effect are another danger of cash advances made with a credit card. The annual percentage rate (APR) is always higher and is usually double the percentage normally charged. Most consumers are not aware of the high APR. They usually feel that it can be treated in the same way as other purchases made with the credit card.
Danger 3: No grace period
Cash advances do not offer a grace period unlike most credit card transactions and interest begins to accrue immediately. As soon as the process is completed, the balance increases, which may result in an increase in fees that exceeds the amount of the initial cash advance. This can put you in a situation where you may have to pay the amount in advance sooner than the other amounts owed.
Danger 4: Facilitates bad financial habits
When you start opting for cash advances in all types of emergencies, it can become too easy to develop bad financial habits. This can lead to dependence on readily available cash and you may not be able to put money aside for difficult situations. This can lead to misuse of funds, higher interest rates and longer repayment periods. If you opt for this several times, you will soon end up with a mountain of debt.
It is always best to think twice and look for other options in the face of a difficult financial situation because the risks associated with using cash advances can outweigh its short-term benefits. Avoid falling into a debt trap that you may have trouble escaping.