While reviewing my credit card statement recently, I thought it was odd as I noticed that one of the items was an interest fee from an apparent cash advance. Seeing this “interest fee†on my statement was a real shocker as I am one of the last people that would use this kind of service considering how disciplined I am in handling finances. Upon further investigation, it appeared that a company had billed my credit card as a cash advance as oppose to a normal sale. I am still waiting for a response from the company to hopefully clear it up, but I’ll save that for another blog entry if things get interesting as I’ve never seen that kind of a practice used by a merchant before.
The interesting thing is that this error definitely gave me a glimpse on how people who actually use cash advances could drive themselves into debt with the fees that come attached to it. If you have to pay 1 to 4 percent to receive a cash advance, it might seem small for low figures, but like everything else it could easily add up as you continue to withdraw more money through it. From doing some further research on the matter, another factor is that interest charges are calculated immediately once you withdraw the funds with no form of a grace period. I can only imagine how many people each day use cash advances without reading about all the fees and strings that are attached with it.
In my opinion, using something like this for convenience to pay off a certain debt can counteract your efforts in reducing it as the accumulation of fees can drive you further into debt in the long run. As an over exaggerated example, if you had a $1000 debt, would you offer to pay $1200 instead? That is kind of what you would be doing if you factor in the fees for taking a cash advance option. Try to think on what would be best in the long run when using these types of services and you’ll probably help yourself save a lot of money.
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