What the Cash Advance Interest Rate Means For You
The cash advance interest rate varies from card to card. As a consumer it is important that you understand the difference between regular purchase interest rates and cash advance interest rates. Most credit cards offer competitive interest rates for normal purchases, but the rate for cash withdrawals is usually going to be much higher. The cash advance interest rate can be the normal annual percentage rate, but in most instances it is much more. An example is a gold card that has an annual percentage rate of 13.99%. It also has a cash advance interest rate of 22.50%.
Obviously the cash advance option has a much higher rate of interest, thus greatly increasing the balance due. Credit card companies also will apply your monthly payment to the lower interest earning balance and leave the higher balance untouched to accrue more interest. This can quickly make your credit card balance balloon to unacceptable levels.
Information is Key
A great way to avoid unnecessary interest charges and higher balances is to know the card that you are using. The card is accompanied with all of the information about itself; various rates, fees, charges, and other pertinent credit card information. If after reading this information you are unsure of all of the applications call the companies customer service number and they will be happy to explain each detail. This step is important because it gives you the required knowledge to make informed financial choices regarding your particular credit card. This way if you maxed out your credit limit by using cash advances it will not be a surprise that your balance is now much higher than the available spending limit.
Hidden Cash Advance Rate Applications
The reason that card education is paramount is because the cash advance rate may be applicable to other card options such as bill payment or buying travellers cheques. Existing credit card companies may apply cash advance interest rates for balance transfers to another card. Finally, the interest free payment days that various credit cards offer for balance payments does not apply to cash advance balances. The moment that the money comes out of the machine, the inflated interest rate, or the cash advance interest rate begins. There is no grace period for that card option, so that balance is adding to your existing balance the moment that the transaction is complete.
Most Australians and other financial consumers worldwide do not pay attention to expensive details such as cash advance interest rates. This is why card information and education is important. With information at hand, consumers can make financially sound decisions with their credit cards.
