Being approved for a credit card can be very exciting, especially when it comes with perks like cashback and travel miles. Apart from just being a way to expand buying power, a credit card is also physical proof that major institutions trust you with serious financial decisions. This is especially true when your card comes with a cash advance feature.
If you’re not already familiar with the feature, cash advances allow you to withdraw cash against a portion of your allowed credit, usually through a compatible ATM. If your card is backed by a major provider like VISA or Mastercard, this means that you can withdraw local currency from potentially millions of ATMs worldwide, making the feature a must-have for travelers.
However, there is a reason not all cards offer this useful feature. Physical cash is much harder to trace than electronic credit card transactions, making cash advances a particularly risky offering for card issuers. As a result, this feature is either not present or strictly limited on many entry-level credit cards. Generally speaking, you are more likely to find this feature on exclusive cards that you can typically only get when you have a good credit history.
What to Do When You’ve Taken Out Your First Cash Advance
Even if your card issuer thinks you’re a good bet, you’re the only one who can tell if your credit limit does make sense for your income and spending habits. Since the cash advance limit in credit card products is almost always a portion of the total credit limit, this means you should play it smart and avoid borrowing more than you can handle.
If you take out a credit card cash advance on a product like the Landers Cashback Everywhere Credit Card from Maya, here’s a practical checklist that will help you pay it off faster:
1) Understand the Terms of Your Card’s Cash Advance Feature
Cash advances are typically far more expensive than regular credit card purchases, often featuring facilitation fees as well as higher interest rates. Should you take on a cash advance, knowing your issuer’s fee structure will help you pay back your loan more efficiently, with less of an impact on your day-to-day finances.
2) Make Your Cash Advance Your First Priority
Compound interest on small cash advances can quickly balloon into serious debt if you neglect to prioritize it. If your income cannot cover the entire debt within the next month or so, consider temporarily cutting back on discretionary spending to free up more funds. If it will take longer than a month to repay, outline a realistic repayment schedule based on your budget.
3) Aim to Pay in Full
Though credit card issuers often require only a small minimum payment each cycle, you must commit to paying the entire amount in full, as quickly as possible. Paying just the minimum will prolong the debt, increase interest, and put you in an increasingly unfavorable situation. If you can’t pay in full, pay as much as you can afford beyond the minimum required amount.
4) Track the Advance Amount in a Journal
On a notebook or spreadsheet, set up a journal that includes the exact amount you withdrew, the transaction date, and the planned repayment dates leading up to the full repayment. Keeping a record will make tracking easier and, more importantly, hold you accountable to your repayment commitments.
5) Don’t Take On Additional Debt in the Meantime
As a rule, you only want to be managing one high-interest loan at a time. Managing more loans will make paying off your original cash advance that much harder.
6) Set Up Payment Reminders
Even if you subscribe to your issuer’s email and text reminders, these can come late or not be sent out at all. For that reason, you’ll need to set up recurring reminders on your phone to notify you of impending due dates. The best time is usually on your salary pay dates so that you have available funds.
7) Negotiate with Your Bank if Needed
If your financial situation becomes challenging, most banks are willing to discuss potential repayment arrangements or lower interest rates. Though your creditworthiness will take a hit, renegotiation is far more preferable than being stuck in a never-ending debt spiral.
8) Celebrate Small Milestones
Make it a point to acknowledge each repayment milestone with a small, budget-friendly reward. Though doing this arguably slows down your repayment, it can make the experience much more sustainable, which is what usually matters.
9) Learn From the Experience
As you go through the process of repaying your loan, do your best to internalize the lessons you got from the whole experience, from the technical details of your advance to the potential loan alternatives you might have missed the first time around. Push yourself to become financially wiser and you will be prepared to take on more complex situations in the future.
Use Your Cash Advance Privilege Responsibly
The ability to withdraw cash with your credit card should be seen as a perk that’s best reserved for real emergencies. Despite the convenience, the fees and high interest rates make this feature exceptionally expensive and thus make it important to explore your available alternatives for getting physical cash. Still, should you find yourself needing a cash advance, this checklist should help you avoid serious financial strain.
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