A cash advance is money you borrow from your bank and spend immediately—ideally
on something you can pay back quickly. It’s not a loan, which means you don’t need to
provide collateral or prove that you won’t blow the cash on frivolous things like fancy
cocktails or first-class flights. In exchange for this trust, cash advances have high
interest rates, often around 20 percent. But if used wisely, they can be a great way to
get your hands on some ready cash when an unexpected bill pops up or an opportunity
comes along that you want to take advantage of right away. Here are a few things you
should know about cash advances and how they work at your bank.
How to request a cash advance
A cash advance is a specific kind of transaction on your checking account. If you’re at
the ATM, you’ll also see it as a separate “debit” on your account statement. To start the
process, visit your bank’s website and log in to your checking account. Click on
“Manage My Account” and then “Cash Advance.” You’ll be presented with a set of
questions that you’ll have to answer before your request goes through. One thing to
keep in mind is that if you have overdrawn your account in any way, your cash advance
request may be denied. Be sure to keep a healthy balance in your checking account so
you don’t find yourself in a pickle. The last thing you want to do is start incurring
overdraft or NSF (“not sufficient funds”) fees.
How much you’ll pay for a cash advance
The interest rate on a cash advance is very high compared to a loan or credit card
balance, but that’s because you’re paying for the privilege of getting your hands on the
money right away. Let’s say you request a $1,000 cash advance at a 20 percent annual
interest rate. Over the course of a year, you’ll pay $200 in interest. That’s a pretty high
rate, but it’s par for the course for a cash advance. It’s important to keep in mind that
these loans are not tax-deductible. Let’s say you have an emergency that pops up and
you need $3,000. You could take out a $3,000 cash advance and pay $600 in interest
over the course of a year. That’s a pretty steep price to pay. You’re better off taking out
a personal loan and paying a lower interest rate.
When your bank will deny your cash advance request
Your bank may deny your cash advance request for a number of reasons. They are: –
You have too many recent cash advances. Banks will often look at how many cash
advances you have taken out in the last six months. If you’ve got a bunch, you’re likely
to be denied. You might be denied if you’ve taken out too many cash advances in the
last 12 months. – You’ve overdrawn your account in the past six months. If your account
has been negative at least twice in the last six months, you’re more likely to get denied.
– Your account has a low balance. If you’re a low-income person with a very low
account balance, you may be denied. If you have a high-end account, you’re more likely
to be granted a cash advance.
When your bank might grant your cash advance request
If you have a high income and/or a large account balance, you are more likely to be
granted a cash advance. If you’re a business owner, you’re likely to have an easier time
getting a cash advance. If you have a credit card with a high credit limit, you’re more
likely to get approved. You’re also more likely to get approved if you’ve had an account
at the same bank for a long time and have a strong credit history. If you’re a student,
you’re less likely to get approved, since banks are wary of giving cash advances to
young people who may not be able to pay them back. If you have a poor credit history,
you’re less likely to be granted a cash advance.
Other reasons you might be denied
Banks are rightfully cautious about giving out cash advances. After all, you’re asking
them for money and promising to pay it back—with interest. If you’ve got a bad history
of repaying debt, you may be denied for a cash advance. If you’re currently in debt, you
may be denied for a cash advance—especially if the debt is overdue. If you’ve had a
recent history of overdrawing your account, you may be denied. If you’re very young or
old, you may be denied.
And finally, what to know before you take out a cash advance
Cash advances are extremely expensive. They are not a long-term solution to financial
woes. If you’re in debt, you’re better off consolidating your debts and getting on a debt
repayment plan. If you need money immediately, it may be better to take out a short-
term loan from your bank or a peer-to-peer lender. You can also sell your stuff to raise
cash. Do your research before taking out a cash advance. Find out what rates banks
charge and which ones are cheapest. You’re better off taking out a cash advance from
your credit union than a big bank. Credit unions usually charge lower interest rates. You
can also check out online lenders.
Conclusion
A cash advance is money you borrow from your bank and spend immediately—ideally
on something you can pay back quickly. It’s not a loan, which means you don’t need to
provide collateral or prove that you won’t blow the cash on frivolous things like fancy
cocktails or first-class flights. In exchange for this trust, cash advances have high
interest rates, often around 20%. A cash advance is very expensive, but it’s a great way
to get your hands on some ready cash when an unexpected bill pops up or an
opportunity comes along that you want to take advantage of right away.
