“Cash advance” is a term used to describe several types of small-dollar financial products or services. Cash advance loans are designed to help you get the cash you need in emergency situations. Many of these loans are versatile and can be used for many different reasons, such as unexpected medical or vet bills, emergency home repairs, car repairs, and so on. They can be found online, through apps, or at storefront locations. Although online cash advances are becoming a more popular option as they become a more widely available type of loan..
Cash advance loans are fairly straightforward, and aim to provide extra cash to help you before your next paycheck. Taking out a cash advance loan is meant to help borrowers get back on their feet. But if you don’t do your research and find a safe and trustworthy loan they can lead to late fees, high rates, or even debt collection.
What Is A Cash Advance?
The term “cash advance” can be used to describe a couple of methods of short-term borrowing that have a mutual purpose—quick money in times of need. Nowadays, there are many ways to get a same day loan. But whether you get your loan at a storefront or choose a cash advance online, the same rules apply. So make sure you know the details of your loan and lender before signing on the dotted line.
There are three types of cash advances: cash advance loans, credit card cash advances, and employer cash advances. In contrast to the other two cash advances, employer cash advances don’t fully qualify as traditional loans. You may also hear the term “merchant cash advances,” but these are basically alternatives to small-business funding if you own a company. For our purposes, we’ll be focusing on cash advance loans and credit card advances.
An employer cash advance technically is borrowed money, but it doesn’t necessarily need to be returned. The reason is simple: you’re borrowing from your own paycheck; the money is just given to you by your employer sooner than you would usually get paid. This can be a good way to avoid traditional loan fees, online apps, and a loan application process. But one of the cons to this is that it could strain your relationship with your employer if you do it too often.
Generally speaking, cash advance loans are intended to provide you with money to tackle sudden or urgent expenses immediately, before your next paycheck arrives. When you’re in the midst of a financial emergency an online cash advance or other type of online loan can potentially help out. So it’s important to know the difference between all the online loans available to you.
You may also hear cash advances referred to as payday loans, cash payday loans, or payday cash advances. Read on to learn more about the distinctions between these online loans.
Cash Advance Loan VS. Credit Card Cash Advance
To apply for a payday cash advance, or payday loans in general, you would simply need to write a check dated for the day your next paycheck will arrive, and then apply with an online or storefront lender. The amount you put down on the check is the amount you want to borrow, with the addition of the lender’s fees and interest. After that, you would get the money in cash or transferred to your account to spend it however you wish, usually within one or two business days. Keep in mind that payday advances can come with extremely high interest rates and fees. And they can often lead borrowers into a cycle of debt that’s difficult to escape.
Even if you know that your next paycheck will cover the costs, a cash advance may not be the safest way to take care of an unplanned expense. While it may be good to get a loan without making a long-term commitment, it could also lead to more debt and fees in the future. And if you have a decent credit score you may qualify for another type of loan with better rates or a line of credit with more flexibility.
The process of getting a credit card cash advance is similar to how you’d normally use a credit card, except you will withdraw the money from an ATM. You simply insert the card, choose the amount for withdrawal, and claim your money. Some banks also allow you to perform a credit card advance from your online bank account or their banking apps. One of the main differences when it comes to a cash advance, whether it’s in person or through an app, is that unlike with a debit card, you’re not actually withdrawing any of your own money—you’re borrowing a sum that you’re expected to repay. And if you’re in a pinch, it may be better to use a credit card cash advance than to overdraw on your checking account and incur an overdraft fee(s).. Even having overdraft protection isn’t always sufficient if you’re consistently taking out too much money from your bank account.
It’s important to note that cash advances often don’t offer grace periods like you would get with other types of funding. The interest starts accumulating immediately.. With regular credit card purchases interest doesn’t usually begin accruing for about 30 days, but that will depend on your specific card.
Another factor to consider is the interest rate, whether you’re taking out a loan or a credit card cash advance. On average, the APR (annual percentage rate) for your credit card will hover around 16%, whereas some cash advance loans bump that number up as high as 24% or more. However, this number isn’t alarming when you remember that cash advances are supposed to be returned fully with your next paycheck. Just remember to make your credit card payments on time! This is the best way to manage your credit cards, and to keep your credit score strong. Oftentimes, payments can be made in person, online, or through a designated banking app. A good rule of thumb is to only use your credit card if you’re sure you can pay off the purchase within 30 days.
Think of it this way: for every $100 you borrow, you will typically need to pay about $5–15 extra to a lender. So be sure to approach these loans carefully, as taking out a cash advance loan can be risky if you don’t find the right loan or lender. It’s important to make sure any loan you’re considering fits into your budget before filling out an application. A risky and expensive loan will only lead to more trouble than it’s worth.