“Avoiding and Handling Cash Advances: A Comprehensive Guide”

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Can You Pay Off a Cash Advance Immediately?

You might be able to repay a cash advance as soon as it appears on your account. However, you may need to pay back more than you borrowed due to cash advance fees charged by many credit cards. Interest can also start accruing daily, leading to a larger balance if you don’t pay off the cash advance quickly.

How to Pay Off a Cash Advance

You can make a credit card payment at any time, and it might be applied to your cash advance balance once the cash advance is posted to your account. However, the cash advance might be pending for several business days before it’s posted.

Additionally, many credit cards charge a cash advance fee, which could be 3% to 5% of the amount for each cash advance. The fee immediately gets added to your account’s cash advance balance. Depending on your card’s terms, the cash advance might start accruing interest on the transaction date or once the transaction is posted.

For example, if you get a cash advance for $500, your cash advance balance may be $525 after a 5% cash advance fee. The cash advance annual percentage rate (APR) might be 30%, which could lead to a daily periodic rate of 0.082% (30 divided by 365). The cash advance could accrue about $4.31 in interest the first day alone—and about $130 over the first month.

Are Payments Applied to Purchases or Cash Advances First?

The cash advance balance often gets paid off before purchases because it tends to have a higher interest rate. However, credit card issuers can make a few choices about how to apply your payment, and other balances might come before the cash advance. Here’s how it usually works:

• Installment plans: Many credit cards let you pay off certain purchases with an installment plan that has fixed monthly payments. Your credit card payment could go toward the installment plan first.
• The minimum payment: Your payment will then be applied to your statement’s minimum payment amount. Many card issuers choose to apply the minimum payment amount to the balance with the lowest APR first.
• The balance with the highest APR: If your card has balances with different APRs, any amount you pay beyond your minimum payment must be applied to the balance with the highest APR first.

How to Avoid Cash Advances

While a cash advance might help you get cash if you’re in a pinch, it generally isn’t a good idea because of the fees and high interest rate. Consider some alternatives if you need cash quickly, such as:

• Use your savings: Dipping into savings or an emergency fund might make more sense than paying the cash advance fee and interest.
• Ask a friend or family member for a loan: If you only need to borrow a little bit of money and are certain you can pay it back, consider asking a friend or family member for help. If you’re out and about and need cash, you might even be able to borrow cash and repay them immediately with a payment app like Venmo or Cash App.
• Get a personal loan: A personal loan might be a much cheaper alternative to a large cash advance. It might take a few days to apply and get the money, but there are online lenders with quick and simple applications.

Cash advances can sometimes happen by accident. Perhaps you used a credit card to send someone money on a payment app, or you purchased a cash-like product, such as cryptocurrency. Accidentally transferring money from your credit card instead of to it will also result in a cash advance. Be sure to carefully read the confirmation text of money transfers between your bank accounts before confirming the transfer.

You might be able to avoid accidental cash advances if you try to lower your card’s cash advance limit. Call your card issuer or log in to your account to see if you can disable cash advances or lower your card’s cash advance limit. You might even be able to set it at $0 if you’re worried about accidentally making a cash advance or someone else stealing your card and requesting a cash advance.

If you accidentally used a cash advance, monitor your account for another month or two, even if you pay off the balance immediately. You might have residual interest from the cash advance that you need to pay off the next billing cycle.

Improve Your Credit to Increase Your Options

Even if you can’t afford to pay off the entire cash advance quickly, making early payments can decrease how much interest accrues and save you money. You can also look for ways to improve your credit to get access to credit cards and loans with better rates and terms. If you’re not sure where your credit is at right now, check your FICO® Score for free from Experian and use your Experian account to monitor your credit report and score.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We are here to help you with the best mortgage solutions tailored to your needs.

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