Since this is the interest rate for purchases without exception, the prepayment credit can accrue interest for months at this high-interest rate.
Since this is the interest rate for purchases without exception, the prepayment credit can accrue for months at this high-interest rate. A cash advance doesn't directly affect your credit score, and your credit score doesn't indicate that you've borrowed one.
The difference varies from card to card and from customer to customer, but the average annual interest rate for credit cards is just over 16%, while the average annual interest rate for advance payments is almost 24%.
But if you find that you're often using cash advances to pay for things, especially for essentials like groceries, it's time to take a closer look at your budget and spending and make an effort to balance the two.
While credit card cash advances are anything but a perfect financial solution and won't help improve your credit score, they're far preferable to “cash advance loans,” which are really just payday loans in disguise.
What is a cash advance and why is it bad?
Sullivan of taking Charge America says that if you own a home, a home equity credit line (known as Heloc in banking circles) generally offers interest rates that are far lower than credit card advances.
The amount of fees and interest you pay is directly related to the length of your repayment, so cash advances are intended as a very short-term solution.
This option could free up cash in your budget and wouldn't incur the additional fees or higher annual interest rate of an advance. A cash advance can be helpful for someone who needs cash quickly and has a solid plan to pay it back quickly.
Is it bad to use prepayment?
There are many reasons why you need quick and easy access to cash, and thankfully, there are a few alternatives to paying the hefty fees and interest that come with cash advances.
However, the prepayment balance is added to your credit card debt, which can affect your credit score if it makes your credit utilization rate too high.
Paying out a cash advance may be a good idea at the moment, but it can quickly cause you to accumulate debt. A cash advance doesn't directly affect your credit score, and your credit score doesn't indicate that you've borrowed one.
