Charging your purchases is perhaps the most common use you’ve got for your credit card, but did you know that you can borrow cash directly from an ATM using your card as well? A cash advance, which is a service offered by most credit card providers, allows you to withdraw part of your credit as cash, though typically at a lower percentage of your credit limit.
For instance, if your credit limit is PHP 100,000, then your credit card provider might just set your cash advance limit to 30 percent of that, meaning that you can only get up to PHP 30,000 for your withdrawal. Learning how to cash advance in credit card is also quite simple, since you’ll only need to go to a nearby ATM and withdraw from it as you would using a debit card. This service can be a lifesaver during emergencies or instances when you’re dealing with businesses that only accept cash.
Despite its usefulness, however, a cash advance is essentially a loan and thus should be used responsibly if you want to avoid falling into a debt cycle. If you’re planning to get a cash advance anytime soon with a card like the Landers Cashback Everywhere Credit Card by Maya, here are some tips for making sure you’ll be on track towards paying it off on time:
1) Read the Terms Carefully
Different cards will have different terms when it comes to their cash advance offer. It’s always a must to read your credit card’s terms and learn about all the fees associated with a cash advance. This will allow you to plan ahead how with regard to how much cash you’ll take out and thus keep your interest charges to a minimum.
Many cardholders also think that getting a cash advance is just the same as charging something to their credit card, assuming that it won’t accrue interest until the next billing cycle passes. However, cash advance transactions actually start earning interest the moment you withdraw the money. Be sure to take note of this and be aware of the interest rate to avoid unpleasant surprises once your credit card bill arrives.
2) Repay Your Cash Advance as Soon as Possible
For your cash advance to accrue the smallest possible amount from interest charges, you’ll want to repay it as soon as possible. While this can understandably be difficult, especially if you’re still recovering from a financial emergency, the least you can do is make sure you stick to the repayment schedule that your credit card provider has set. Even if you can’t pay for the cash advance in full right away, making even small payments can keep your growing interest at bay.
In addition, if you happen to have multiple credit cards, be sure to avoid getting another cash advance for the purpose of paying off a current one. Doing so will only pull you further into a debt trap, and that’s certainly a situation you’ll want to avoid. Try instead to formulate a more sustainable repayment strategy, which the next tip can help you with.
3) Set a Stricter Budget for Yourself
Part of your repayment strategy should focus on setting a tighter budget to make sure you won’t miss any of your payment deadlines. Track your income and expenses in detail to have a clear idea of where your money is going. This can help you spot expenses that you can reduce or even completely cut off. For instance, you can stop subscriptions to services that you aren’t really using anymore to free up your budget and allocate that money towards paying off your cash advance instead.
Moreover, if you happen to receive any extra income—whether that be your 13th month bonus or a tax refund—then consider putting it toward your repayment plan instead. Making more than your minimum payment will significantly cut down your growing interest charges and thus make it easier for you to pay off your cash advance in full later on.
4) Track Your Progress Regularly
Tracking your payment progress after your cash advance doesn’t only let you know how much you still have to pay; it also helps you stay motivated seeing that you’re getting closer to being debt-free with each payment.
If you do happen to notice that you’re lagging behind in your payments, then this could be your wake-up call to reassess your repayment strategy. You may consider getting financial counseling as well to enlighten you on the steps you need to take to get back on track or to help you create an improved debt repayment plan.
5) Prepare an Emergency Fund for the Future
Lastly, to make sure you won’t fall into a cash advance debt cycle, strive to build an emergency fund to see you through any future financial troubles. Even just setting aside a small portion of your income can do a lot to steadily build the fund over time. With this financial safety net in place, you won’t have to take out a cash advance—or at least not a big one—should you encounter any emergency. This, in turn, will help you avoid worries about high interest charges racking up in the long run.
For sure, a credit card cash advance can be incredibly helpful for financial emergencies, but you’ll want to follow a clear repayment plan to avoid falling into a debt cycle. Let the tips above set you on the right path towards steadily paying off your cash advance and becoming debt-free as soon as possible.
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