A cash advance is when you’re offered a specific amount of money upfront that you’re required to pay back, usually with interest and additional fees. A cash advance is actually a term that could apply to a number of different financial products and loans.
If you’ve ever needed a loan before then you’ve probably heard the term “cash advance.” People use this term to describe a variety of different loans and financing options. Below are a few of the most common types of cash advances:
Credit Card Cash Advance
This is when you use your credit card to actually take out cash. This can be done at an ATM, your bank, or online by transferring credit into your checking account. Most credit card companies allow credit card cash advances. Generally speaking, the interest for a credit card cash advance can be high, and there is no grace period. This means that, unlike regular credit card purchases, the interest for a cash advance will accrue immediately.
Payday Loan Cash Advance
This is a term sometimes used to describe a payday loan. This is an unsecured, quick cash loan that borrowers use to stretch their money to their next payday or to help with financial emergencies. Payday loans are usually used by borrowers with lower credit scores. They tend to carry high interest rates, and they can be difficult to repay on time since they have short repayment periods (usually only about two weeks).
Employer Cash Advance
This is when your employer agrees to pay you money that you haven’t yet worked to earn. They may advance you the cash when you need money urgently, then take that money out of your next paycheck. Some employers may offer this as an option, and others may not. It all depends on your specific employer and your relationship with them.
No matter which type of cash advance you choose, the important thing to remember is that paying it off is crucial. Not repaying the advance could potentially add to your debt and lower your overall credit score.