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Cash advances come with their own risks and rewards that you should consider before taking such a move. Taking out a cash advance is normally done by carrying a balance on a credit card, withdrawing cash from an ATM, or even buying a prepaid card. While these can provide flexibility when making purchases, carrying that cash advance can lead to expensive fees and interest rates that can quickly add up. Does this balance disappear if you pay off your credit card?
Understanding Your Interest Charges
The interest charge from taking out a cash advance is separate from the cost of purchases on a credit card. It is also independent of the balance on your credit card – as soon as the cash advance is taken, the interest rate may be charged regardless of how much money you may owe. Depending on the credit card, some suppliers may include fees on top of the interest charged for taking a cash advance.
Usually, credit cards will offer an introductory interest-free period when making purchases. This does not apply to a cash advance balance – so it is important to keep track of the actual interest rate that will be used to calculate the cost of a cash advance. If the interest on purchases drops, that does not necessarily mean the same reduction will be applied to a cash advance balance.
Paying off a Cash Advance Balance
One way to avoid any additional interest and fees from being applied is to pay off the balance in full. When you pay in full, the interest rate will be waived and you will not need to worry about any additional costs or interest. It is important to pay off your credit card debt in full – else, the interest rate could increase and you may even be charged with a penalty fee.
Another aspect to keep in mind is making sure that any payments made are made to the balance that is set aside for a cash advance. Simply paying off the minimum balance on a credit card statement does not necessarily mean you are paying off your cash advance. Making sure to specify when making payments that they are for your cash advance balance will help ensure that you are not charged with any additional costs or interest.
If you are unable to make payments in full for your cash advances, there are other options. It is important to communicate with your credit card supplier if you are having difficulty with making payments, as they may be able to offer assistance in the form of lowered interest rates or a repayment plan. However, it is important to note that some credit card suppliers will not offer such solutions.
Cash advances offer flexibility and cash flow but it is important to keep track of the interest charged in order to avoid additional costs. Paying off the balance in full can help to avoid this, but there are alternative solutions if you are unable to do so. Multiple payments and communicating with your credit card supplier are a couple of ways to help reduce the burden of a cash advance balance.
Cash Advances on Credit Cards: When Will the Interest Go Away?
When you take out a cash advance on a credit card, the interest starts accumulating immediately. Normally, the APR for cash advances is higher than for purchases. This means that even if you are able to pay the loan off within a few weeks, the interest may still be considerable. But does the interest on cash advances go away if your credit card is paid off?
In short, yes, the interest can go away if you completely pay off your credit card. However, you have to consider other factors, such as the period of the grace period, the APR, the minimum balance fees and any other fees set by the credit card company.
The Grace Period
Pay attention to the period of the grace period — that is, the number of days you have to pay the balance off without incurring interest. Many credit cards do not offer a grace period on cash advances, which means that interest will begin to accumulate from the minute the money is withdrawn. In that case, the only way to avoid paying the interest on a cash advance is to pay off the balance as quickly as possible.
High APR and Minimum Balance Fees
In general, the APR for cash advances is higher than for purchases. So it’s important to bear in mind that, even when you pay off your credit card, you may not avoid the interest entirely. Similarly, if your card has a minimum balance fee, you may still have to pay this even if the account balance is paid in full.
Cash advances on credit cards can be a costly choice — unless you’re able to pay the balance off quickly, the interest can really add up. And even when your card is paid in full, you may still have to pay an APR or a minimum balance fee. Therefore, if you ever consider taking a cash advance on your credit card, be sure to factor in all the potential expenses and make sure you’re able to meet them.