Cash advance on Credit Card

Old Apr 20th, 2000, 08:16 AM
  #1  
Mike
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Cash advance on Credit Card

I have heard two different things about getting a cash advance on a credit.....one, that it is a good way to get money, and get a good exchange rate, and you can pay it back in the future.....and two, that the interset is ridiculous and that you shouldn't do it. Has anyone done this, and what are the pro's and con's. I am a graduating college student and don't have a lot of money, so was hoping to use the credit line to enjoy my trip to Paris.

thanks.
 
Old Apr 20th, 2000, 08:24 AM
  #2  
sheri
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It totally depends on the terms of the particular credit card. Many have high, high interest rates for cash advances (higher than the rate on purchases or balance transfers), and they charge a fee for each advance (usually a percentage of the amount). So your best bet would be to use the card for purchases (hotels, restaurants, etc) rather than getting cash advances to pay for these things.

You should call your card issuer and find out what the deal is.
 
Old Apr 20th, 2000, 08:38 AM
  #3  
Edward
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Mike---I would never get a cash advance on my credit card. Unlike with purchases where you don't have to pay interest if you pay the balance every month, if I get a cash advance the interest starts accruing immediately. All cards I've ever had had that provision. I prefer using credit cards for purchases and ATMs for cash.
 
Old Apr 20th, 2000, 08:49 AM
  #4  
pam
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Mike,
If you have $ saved for your trip, and you want to use credit cards for cash and charges, go ahead and send your saved $ to your credit card bank (assuming you have a zero balance). That will establish a credit in your account, against which you can draw with either charges or cash "advances"--but CHECK WITH YOUR BANK and make sure they'll handle things this way. Generally cash advances start accruing interest immediately (no grace period even if you have a zero balance on last cycle). You must find out all the rules to be able to play by them to your advantage. On the other hand, are you sure you want to depend solely on one card? Would you rather leave your savings in an ATM-card-accessible account, and use your credit card for charges?
 
Old Apr 20th, 2000, 09:17 AM
  #5  
Christina
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I think it's generally a bad idea if you care a lot what you're paying for the money. Don't be fooled by any promotional literature your credit card company has sent you telling you how you can use the card in an ATM machine; yes, you can but it will still be treated as a cash advance, not like a regular bank ATM card (AT&T pushes this idea of using their VISA at ATMs a lot because they make a lot of money on it). A couple other points to consider on the last suggestion--even if you wouldn't pay interest charges if you create a credit balance on your card, you will stay pay a transaction fee for that advance which may or may not be higher than an ATM transaction fee. Also, putting excess money into a credit card acct will probably NOT change your withdrawal limits which were set by the company for a reason, so if you as a college student have a $1000 limit, you can put in $5,000 as a credit payment and will probably not be able to access it at all. At least that's the way many credit cards work I've queried. In short, a credit card is not an ATM card, so I don't think it's a good idea to try to turn it into one and can't see any advantage to that as I presume you have a real bank ATM card. Also, your exchange rate will, if anything, be worse on your credit card than your ATM card as many charge 2-3 pct fees for foreign currency conversions (I don't think banks charge a conversion fee for withdrawals with ATM cards but I could be wrong on that). It sounds like you don't have the money for your trip and intend to charge it, so I guess the idea of putting in all your cash to prepay a huge credit balance wouldn't be possible, anyway. Basically, it sounds like you want a loan interest-free and there isn't such a thing, unfortunately.
 
Old Apr 20th, 2000, 09:24 AM
  #6  
Brian in Atlanta
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Credit card cash advance: Just say no.
 
Old Apr 20th, 2000, 09:46 AM
  #7  
Mike
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Thanks for the advice.....I am in a bit of a predicament. I don't really have much money at all for the trip. I am doing it for school as a final requirement, and will be abroad for 2 months. I will hope to have about 1,000 of my own money ready for the trip. I have spoken with someone that wwent to Spain, and they told me that they used a cash advance and there was no problem. I figure that i will be paying bills for the rest of my life, so I might as well have a little bill to pay back when i start my job in August, and at least enjoy life while in Paris. How high exactly are the fees. Say for example I take out 100USD worth of FF....what will i end up paying on the $100 when I return 2 months later? I figure that when I get back I can start paying that cc bill back along with college loans.
 
Old Apr 20th, 2000, 10:10 AM
  #8  
Brian in Atlanta
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You have to check with the card issuer for the fees. You'll have to give them a call. 3-5% is probably the range. Plus, you'll owe 2-months interest (at the higher cash advance rate - likely near 20% per year) when you get home.

If you have any hope at all in making a decent living and retiring this debt (i.e. you're not a Political Science major) then get the cash anyway you can. Plus, the $ is extremely strong these days - it surpassed 7 French Francs today!
 
Old Apr 20th, 2000, 11:04 AM
  #9  
Mike
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Well I guess that I am out of luck....I am a political science and international affairs major.....whats's so wrong with that
 
Old Apr 20th, 2000, 12:00 PM
  #10  
Bob Brown
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For Mike. I think the idea put forth about a person's major in college was to illustrate that many people tend to be unaware of just how interest rate costs and fees can pile up and add to the debt burden. Call it by any other name, a cash advance is a loan that carries a very high rate of interest.

I am not sure the major in college has anything to do with it. The comments as I read them say: "Be smart about your money." Even business majors are often dumb about money!! (I know; I teach them!!)
As a general rule, credit card issuers love people who take cash advances because that type of financing enables them to charge the highest interest rates allowed by the law. Even paying off credit card balances over time often costs the card holder interest payments calculated at a true annual rate of 18%. (Compare that with the savings account CD rate of less than 7%!!)
I personally would not take a cash advance or float payments on my credit card because of the high rate of interest -- because that is my money going down the drain and into the bank's pool.
I don't care how good the exchange rate it, you cannot borrow your way out of debt.
If you want to go to Europe and have to finance it, talk to your bank and see if some form of short term loan is possible at less than 18% interest. (Or talk to Aunt Martha and see if she will float you a loan!!)
I don't care how good the exchange rate is, credit card advances are a tremendous deal for the bank.
(Which means you are the pigeon!!)
 
Old Apr 20th, 2000, 12:02 PM
  #11  
Brian in Atlatna
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What are the odds? Didn't mean any offense, Mike. I have a poly-sci friend who sometimes frequents these forum that I like to rib. Have a great trip.
 
Old Apr 20th, 2000, 01:37 PM
  #12  
Bob Brown
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For Mike:
Let me share a few details which I hope will illustrate just how expensive credit card debt is. I just got my credit card statement from Wachovia. Enclosed were some little checks that seemed inviting. Do this and do that. Just sign this little check for the money to do it with.
Well, as near as I can tell, if I signed that little check, the money I receive is a cash advance against my line of credit.

So I read a little more in the fine print. Those little checks are a CASH ADVANCE. If I sign one them, I pay interest at the rate of 1.665% per month, which equates to a true annual rate of 19.99%.
Therefore, if I signed one of those little jewels for $2,000, I would have the pleasure of paying 1.665% per month on the unpaid balance until I had paid off the whole thing. At a pay off rate of $200 per month, the advance could easily cost me $205 in interest payments. So spending $2000 now means I pay back $2205 later. If I don't have $2,000 now, where do I get $2205 later??

How did I get my numbers? Well I ran a series of numbers on Excel where I multiplied the unpaid balance each month times .01665. Then I added that to the previous month's balance and substracted $200.

It may not be exact, but it is close.
 
Old Apr 20th, 2000, 01:43 PM
  #13  
Cindy
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Mike,

As one who used to be a poor student, I understand the difficulty of raising the cash for a big trip while one still has the time to take a big trip.

Here's one idea (which I hope is not immoral, illegal or otherwise objectionable). If you have student loans, perhaps you can arrange to defer their repayment for a few months. That way, you can conserve your cash for your trip and also quickly repay any credit card bills you're unfortunate enough to have. Getting an early start repaying those credit cards is going to be really important, and student loan debt is usually cheaper to carry than credit card debt. One related strategy is refinancing your student loans. This used to be available (through SallieMae?) and one could turn 10 year loans into 20 year loans. (Beware: my friends who did this are STILL paying for college!) I shudder at the thought of having so much long-term debt, but this might help if you really, really want to take the trip. And if all else fails, start a dot.com when you get back.

Have fun!
 
Old Apr 20th, 2000, 02:09 PM
  #14  
elvira
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Mike, here comes some good old Yankee common sense (even a poli/sci major can figure this out):
1) Use the cheapest money first; no-interest, short-term loans (i.e. credit card charges paid off *every month*), then your own cash (free cash, then cash that's earning interest), then collateralized loans (mortgages, car loans, etc.), then personal loans, THEN and only then, interest-bearing short-term loans like cash advances and unpaid charges on your credit card.
2) Now, throw all that out the window and decide that a trip is worth whatever debt you'll have when you get back. Within that, pick yer poison. If you know you won't pay back the credit card bills in time to not incur interest charges, then use your own $$ first. If you can't get a collateralized (home equity, for the sake of argument) loan, then try for a personal loan, which can also be a line of credit (you have the ok to 'borrow' up to a certain amount, but no charges until start taking the $$). If no go, then use your credit card for *purchases* and payments, and your own money for cash items (access it via an ATM debit card, or travelers' checks, or a deposit to a savings acct in the country you're visiting). If, finally, you are in a predicament and have no cash or access to it anywhere else, use the credit card for a cash advance (I'd gladly pay 21% a year NOT to spend the night in jail). Only once I used the cash advance feature (nothing to do with jail - at least, that time - but a store didn't take credit cards, it had something I wanted, I was leaving the next day for home, it was worth the few bucks of interest until I got home and sent them a check).

I have a friend who graduated with a poli sci major; she teaches skiing.

 
Old Apr 20th, 2000, 04:39 PM
  #15  
don't try
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If you are have a decent credit rating at present and are thus getting those 2.9-5.9% interest (woo-hoo!) offers all the time in the mail, here's a possible solution. Usually that rate applies only to balance transfers, infrequently to new purchases, rarely to cash advances. So, here's a possibility, albeit a complicated one:

1) Apply for the credit card, making sure to
a) do it in time to get it before the trip
b) note when the promotional rate runs out (usually within 6 months or so, sometimes nearly a year).
2) As close to the trip as you can, do the balance transfer for a sum that clears the balance off the old card AND includes the amount of cash you'd like to "borrow" from the credit card company for your trip (assuming that they've extended you a large enough line of credit for this--otherwise may not be worthwhile).
3) Now, you have a credit on the old card. Either request a check from this credit card company, deposit into your bank account and use your ATM card for cash on your trip; OR, withdraw directly against the credit line with this credit card (be aware that many machines require a four-digit PIN, by the way).
4) DON'T FORGET: now, you've transferred your debt to the new (presumably) lower-interest credit card. They're hoping you aren't able to pay back before the period for the promo rate runs out, and figure they'll make back their investment then. (And, they wouldn't offer this deal if it didn't work out in their favor a good portion of the time.) In fact, if you are now charging things to the new credit card to save that credit line on the old card, be aware that those purchases may accrue interest at a higher interest rate while any payments you make in the meantime go preferentially towards payment of the balance transfer, which is accruing interest at the lower rate.

Not a plan for the careless or absent-minded (or those with no income stream)! But could potentially save you a lot of money (think 2.9% interest on $2000 for 6 mos--ie $29, versus 19.9% on the same amount--$199). However, if you are late with payments, they will often jack the interest rate back up, plus charge you a $15 late fee. You will still have to pay transaction fees on withdrawals (sometimes as high as $5 each MINIMUM, depending on the company--check before you do all this; bank ATM card cheaper). The loan from Aunt Betty (or whomever) is still a more attractive option, if there's anyone who can afford to float you the money.
 
Old Apr 20th, 2000, 07:29 PM
  #16  
moibelle
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Will give you the same advice I give my boys (men) in college. If you can't afford to buy what you want with cash then you can't afford to charge it either. In other words, only charge if you can afford to pay off the bill when it comes in the mail. One of my son's friends has bad credit and it will take him years to dig himself out-if then. The bad thing about that is you can't buy a car, apply for a loan, etc. Anyone know how long it takes for bad credit reports to be expurged from your credit records?
 
Old Apr 20th, 2000, 08:05 PM
  #17  
Cindy
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Aw, come on, Mom!

Poor Mike has been working his fingers to the bone studying political science for lo those many years and you're going to deny him a fabulous trip to Europe because of a silly ole thing like a credit rating? I figure this country was built on instant gratification and crushing personal debt. Mike, you just go ahead and have a great time. It'll all work out!
 
Old Apr 22nd, 2000, 08:28 AM
  #18  
Mike
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Well I would like to thank you all for the advice. The reason that I do not have the money now, is because I am in College. I am interning and getting just enough money from that to spend week to week. I graduate with this final trip to fulfill the last requirement for my dual major...therefore, I plan on getting a full time job, that will pay bak these debts. When i talk about a cash advace, I only mean a total of like 2,000 dollars, which is about an extra 200-400 dollars over the next year which will be paid back. I figure that it is better to take that extra 400 dollars and enjoy my 2 month trip that I may never make again, rather than return and mak money, and wish that I had the opportunity to enjoy myself while I was still young. We'll see what happens.....thanks again........Mike
 
Old Apr 24th, 2000, 01:13 PM
  #19  
xx
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"Well, Mike, you sound like an upstanding and responsible young man..." Really, no more flak. You sound like you've thought about it and your points are well taken. Have a great time. And let us know about your trip when you get home!
 
Old Apr 25th, 2000, 09:15 AM
  #20  
andy
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I just returned from a long weekend in
Paris and used my MAC card in ATM for
cash- works just like at home .. only
you get ff instead of $... I used Visa
and MC for Dinner, etc. No problems with
any of this.
 

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