ATMs have a feature you may not know about that can come in handy if you don’t have enough money to cover a debit card withdrawal from your bank account: your credit card can be used to withdraw cash.
It’s called a cash advance and it’s easy to use if your credit card and the ATM you’re using allow it. Many do, and the money doesn’t have to come from your bank.
Downsides of Cash Advances
There are plenty of downsides, however.
Cash advances are money borrowed on your credit card. The money must be repaid, just like any credit card purchase, but often at much higher interest rates and with fees tacked on.
The fees are usually based on the amount borrowed, such as $10 or 5% of the amount of cash you get, whichever is greater. Get a cash advance of more than $200 and the 5% fee will apply.
Interest is charged immediately, often at rates as high as 25%. No grace period is allowed.
If you don’t repay the advance soon, your credit card company may flag you as a risky borrower because you used a cash advance. That could drop your credit score.
If you need money immediately for necessities such as food, and a cash advance is the only alternative you can think of, we have some options that are more affordable. Here are some to consider:
0% Credit Cards
Some credit cards offer 0% introductory APR on purchases or balance transfers from another credit card.
This can be a good way to pay off a credit card balance without paying interest. For your more immediate needs, it can let you borrow enough money to pay your bills as a sort of short-term loan without being charged interest.
The 0% offer usually lasts six months, but can last as long as two years. People with good or excellent credit are more likely to get these offers than those without.
Of course, getting a 0% interest credit card for an intro period takes some forethought. It’s not as easy as walking up to an ATM and getting a cash advance.
But if you pay off the credit card before the introductory period ends, you’ll get a free loan for six months or more.
Check Your Existing Card
The credit card you’re already using may offer you a 0% card if you’re a longtime customer with good or excellent credit. It doesn’t hurt to ask.
Credit card companies always want to keep existing customers, so telling them that you’re looking for a card with a lower interest rate or no interest for a few months could convince them to try to convince you to stop shopping around.
Promotions come up from time to time, and during the coronavirus pandemic many credit card issuers are offering flexible payment options and waiving late fees. Putting off a credit card bill for a month can help you free up some cash for necessities.
Personal loans come with variables: Secured and unsecured loans, and fixed or variable interest rates are the most common.
Online lenders, traditional banks, and credit unions offer personal loans that can be used for any reason.
If you’re taking out a secured loan, be sure you’re comfortable putting your car or other property up as collateral. If a variable interest rate is charged, be sure you can afford the maximum amount and know when it will start so you can pay off the loan beforehand.
Personal loan interest rates generally vary from 5% to 36%. A high rate can still be cheaper than a cash advance if you account for the fees.
Here are a two online marketplaces to help you shop for a personal loan:
Fiona: This site matches consumers with offers from providers of loans, savings accounts, credit cards and other financial services. Need a loan to pay for your wedding, but don’t have great credit? Fiona can help.
If you need a loan quickly, Fiona can match you with personalized loan offers in less than a minute, based on your creditworthiness. People with credit scores as low as 580 can get unsecured loans from $1,000 to $100,000. Terms generally range from 24 to 84 months.
You fill out a simple form at Fiona’s website, and it will check offers from its providers in seconds. Loans can be searched based on credit scores, location, loan amount, and your needs. These are debt consolidation, credit card refinance, home improvement, or a large purchase.
You then review the offers and choose one that has the best terms for you. If your loan is approved, you can get the money soon.
Credible: This is another free online marketplace that helps consumers find the best loans by comparing lenders and rates. Personal loans, mortgages, and credit cards can be compared.
Credible doesn’t provide loans. It provides borrowers with personalized loan offers from multiple lenders in real time without a hard credit check. Users choose the lender they want, and the lender will contact them to finish the loan process.
Credit Card Loan Programs
Another program to check with your credit card provider to see if it offers it is a credit card loan program.
These allow customers to borrow money at a lower rate than cash advances, and to pay it off over time.
American Express has the “Pay It Plan It” feature. Purchases over $100 can be moved to an interest-free installment plan to pay off over time, for a monthly fee. It could end up being cheaper than carrying a balance on the card and paying interest. Not all big transactions can be paid through Plan It.
Installment plan options vary by customer. The monthly fee is based on your credit card’s APR. For example, if your card has an APR of 14.99%, the monthly fee would be up to 0.66% of each purchase.
Cash advances are not allowed through this AmEx program. You could, however, buy groceries and pay them off over the next month for a small fee.