Credit Card Cash Advances Versus Payday Loans

Know your options

They look so innocent, don't they?

Lately, I have been stewing a bit over the amount of interest I’ll end up paying on some cash advances I got on my credit card. Had I known more about my options beforehand, I would have definitely made a different choice. If I’d taken out a payday loan instead, I could have save a lot of money.

But now, like a motivational speaker who can tell high school students to “stay off drugs” because “I’ve been there,” I present to you my new campaign: Just Say No To Credit Card Cash Advances.

Let’s start at the very beginning

Now, my message isn’t for everyone. But, if you have a credit card that already has a balance on it, listen up. Here is my story.

When I started college, I signed up for a couple of credit cards. When I first got them, I promised myself I’d only use them for emergencies. However, as time went by the definition of “emergency” got a little hazy. Eventually, going out to dinner with friends and attending concerts became major emergencies.

Fast forward

Long story short, I build up a bunch of debt on my credit cards. Several years later, I really did have an emergency. Not a life-or-death emergency, but an I-need-money-now-and-it-has-to-be-in-cash emergency.

I was moving, and my roommates and I found the place we wanted. Only we had to put down our deposit now, or we’d lose the place. And the landlord wanted cash. No sweat, I thought, I’ll just grab a cash advance from my credit card.

What might have been

Now, if I’d taken out a payday loan for the $500 I needed, I could have paid it back when I got my paycheck, plus a flat fee, and been done with it. I’d never have to think about it again.

But, as you can probably guess, that is not what happened. If I’d taken that route, the fee would have been a fraction of what I will end up paying on that cash advance.

Too late for me

If you are thinking of putting your credit card in this machine to get a cash advance, walk away.

I knew that the interest rate on a cash advance was higher than my regular interest rate, but it wasn’t until months later that I found out this:

I cannot pay off that cash advance until I have paid the rest of the balance off. Yep, that’s right, that cash advance will sit there on my credit card, collecting 21 percent interest, while I pay off the rest of my balance. The other balance will only cost me 12 percent interest, so if I had a choice I’d pay off the cash advance first. But I do not have a choice. I know. I asked.

I am going to be paying for that $500 cash advance for years. And years. And years. It will cost hundreds, maybe even thousands, of dollars. So, kids, don’t make the same mistake I did. Just Say No to Credit Card Cash Advances.