Are you considering a cash advance? Take a look at these options first
Take out a cash advance on your credit card might sound appealing: you get easy access to cash, which you might need for groceries or paying rent.
But there are also significant downsides to cash advances, including fees but also interest, which tend to be high and start to add up immediately. There is also often a cap on the amount you can withdraw, and it’s usually much lower than your card’s overall credit limit.
Yet, as expensive as a cash advance is, it exists as a potential last resort if you need necessities – and it’s a better option than, say, taking out a payday loan. But here are a few alternatives that you might want to consider first.
Low interest credit cards or 0% APR intro
Some credit cards offer introductory 0% APR periods on purchases, which means you can use them to finance the purchase of groceries and other essentials without paying exorbitant interest to the bank. advanced. Of course, you will still owe money, but you will have a long period of time – often ranging from six months to almost two years – to pay it off in full before any outstanding interest arises.
With the Wells Fargo Platinum Card, for example, you can enjoy an introduction Introductory APR of 0% for 18 months from account opening on qualifying purchases and balance transfers, then the current APR of 16.49% to 24.49% Variable APR
Other cards offer low interest rates on purchases only: Chase Freedom Unlimited® offers Introductory APR of 0% on purchases for 15 months, then the current APR of 14.99% to 23.74% Variable APR
Flexible offers for your existing cards
Usually, to qualify for an introductory 0% APR credit card, you’ll need good or excellent credit (usually a FICO score of 690 or higher). But some cards offer such 0% offers to long-standing existing customers, which means you may not need to apply for a new card. Check your online account regularly for such promotions.
Additionally, during the COVID-19 pandemic, many credit card issuers are offering other flexible payment options consumers, such as deferring minimum payments, waiving late fees and increasing the line of credit. It can help free up money for other necessities. In many cases, cardholders must first call their issuer and request this assistance.
NerdWallet Guide to COVID-19
Get answers on stimulus checks, debt relief, changing travel policies, and managing your finances.
Credit card loan programs
Some credit card issuers offer loans to existing customers, such as AmEx’s Pay It Plan It , which among other things allows you to transfer certain purchases to an interest-free installment payment plan to pay off over time, for a fee. It might end up being cheaper than having a balance and paying interest.
Lenders offer many types of personal loans, including secured loans, which are backed by collateral, and unsecured loans, which are not. Some have fixed rates, which means you pay the same amount each month until the loan is paid off, while others offer variable rates, which means your payments can change over time. The rates generally vary from 5% to 36%.
Although the interest rate is still relatively high, it can be lower than a cash advance, especially after taking into account the other costs of taking out a cash advance, which are usually a fixed fee or a cash advance. percentage of amount withdrawn.
Third party payment services
If you need to save time before your next paycheck, you may want to consider a service like Plastic to tackle certain bills. The site allows you to use a credit card to cover expenses that are often not payable otherwise, including rent, utilities, child care, etc. For a 2.85% service charge, Plastiq will charge your card for the invoice, issue a check to the seller in your name, and then mail it.
Assuming you can pay the bill quickly – that is, without carrying it over to the next month and without being hit by your credit card’s double-digit interest rate – a convenience fee of 2.85 % may be worth it and be cheaper than other options. If you are using a rewards credit card for the bill, it can help cover these upfront costs.