You can get a cash advance on checking or a credit card, but you may be better off with a payday loan. Image from Wikimedia Commons.
Fees for a cash advance from a credit card or on a line of credit are rising. After the passage of the CARD Act, companies that offer loan credit through credit cards have to find ways to boost their bottom line. If it keeps up, consumers may be better off with a payday loan.
Cash advance fees are going up
The most common method of getting instant cash from credit is to go to a bank, in case you run into overdraft or need a loan until payday. A person simply draws out a certain amount of instant cash from their line of credit into their checking account, and then the balance is paid off the second the next deposit into said account is received. Bank of America and Wells Fargo charge about $2 per every $20 loaned, or about $10 per every $100. Another way to do it is to get a cash advance from a credit card. Essentially, a person withdraws money from their line of credit on the card, and has to pay a fee on top of the monthly interest. Those fees, according to Bankrate, have been increasing since the passage of the CARD Act of 2009.
Then there is a payday loan
Granted, the fees have only gone up 1 percent in that time. However, when that balance, along with that fee, is added to a balance, the interest on it can add up over a long time if it isn’t paid off. Lines of credit – like credit cards – are revolving, or in other words a person has to make payments. In essence, credit cards are revolving installment loans with a plastic card tied to them. Checking advances, like payday loans can be, have to be paid off with the next deposit.
The risk
The only thing is that a payday loan lender has more flexibility with payment plans. A bank will simply take the amount owed from a cash advance, and not offer a payment plan. A payday loan store can offer a little more flexibility. You can read more in the Payday Loan Facts and Statistics Report on Personal Money Market.
