Taking a cash advance make seem a perfect solution if you are
faced with a financial emergency and need quick cash. Most people sign up for
this short term loan as it offers a quick fix to their financial dilemma. One
of the important things that you need to remember is that this perfect solution
comes with a high price. You can land in serious financial trouble if you rely
on cash advances.
Danger
1: Exorbitant fees
Cash advances are promoted by credit card companies to get
quick access to cash in emergency situations. These transactions are often
accompanied by convenience fees. In addition to this fee, you may also have to
pay ATM fees when you withdraw cash from an out of network unit. Every aspect
of the process has some fees associated with it and this makes it costly.
Danger
2: Interest rates
The high interest rates that apply are another danger of cash
advances using a credit card. The annual percentage rate (APR) is always higher
and is usually double than the percentage that is normally charged. Most
consumers are not aware of the high APR. They are usually under the impression
that it may be treated in the same manner as other purchases made on the credit
card.
Danger
3: Lack of grace period
Cash advances do not offer a grace period unlike most credit
card transactions and the interest starts accruing immediately. As soon as the
process is completed the balance will increase and this can result in increased
charges that exceed the original cash advance amount. This can put you in a
situation where you may have to pay the advance amount earlier than other
amounts owed.
Danger
4: Facilitates bad financial habits
When you start opting for cash advances in all types of
emergencies, it may become too easy to develop bad financial habits. This can
lead to a dependency on readily available cash and you may not set money aside
for difficult situations. This can result in misuse of funds, higher interest
rates and longer repayment periods. If you opt for it repeatedly, you may soon
find yourself in a mountain of debt.
It is always best to think twice and look for other options
when faced with a difficult financial situation as the dangers of using cash
advances may outweigh its short term benefits. Avoid getting into a debt trap
from which you may find difficult to escape.
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