Cash advances on credit cards don’t work like normal purchases. These transactions come with different rules and interest rates, and they get expensive quickly. Relying on credit card cash advances to cover expenses is a bad habit. It can easily lead to heavy fees, very high balances, and lower credit scores.

Why Credit Card Cash Advances Cost Arizonians too Much Money

Unless you read the fine print on your user agreements, you may think that using your credit card to get cash is the same as swiping it to buy shoes. Chances are, it isn’t. Most credit card issuers charge higher interest rates for cash advances. Also, these interest rates kick in immediately, with no grace period granted. On average, interest rates on credit card cash advances are around 23.68%, even for cardholders with good credit.

Also, borrowing cash on your credit card normally comes with a fee. Most Minnesotans are charged $10 or five percent of the cash amount borrowed. Unfortunately, borrowers pay the more expensive of the two. For example, if you only need $40, you’ll pay the $10 fee. However, you if need a $600 cash advance, you’ll owe the issuer $630.

When you add possible ATM fees into the equation, credit card cash advances don’t make much sense financially. This is especially true for Minnesota consumers who routinely use them. Depending on your needs, you may consider taking out a small personal loan or borrowing money from a family member as better options. Ideally, though, you should limit your spending and fit your expenses to your income. Treating your savings as a necessary expense is another good tactic. Emergency funds enable consumers to cover unexpected expenses without relying on cash advances.

How Cash Advances on Credit Cards Hurt Arizona Credit Scores

For good reasons, lenders view taking out cash advances on credit cards as risky behavior. As previously discussed, it’s an expensive way to get money. So, if you’re willing to deal with the terms, you must really need the cash. Down the road, if you need a home or car loan, a lender may look at your history of credit card cash advances, and decide that you are too risky to approve.

In the here and now, cash advances on credit cards can hurt your credit score by raising your utilization rate. Arizona consumers who want a better credit score should know that part of your credit score depends on how much of your available credit is used at a time. Typically, it is considered best to use no more than 30% of your spending limits, and cash advances eat up a lot of available credit quickly. For example, if you have a credit card with a $2,000 limit and take out a $500 advance, 25% of your spending limit is gone even before fees and interest are added.

Of course, taking out a credit card cash advance as a one-time deal probably won’t hurt your credit, but it is a risky option. Sticking to a well-planned budget and putting money aside to cover emergencies are good credit-building strategies. Also, another way for Arizonians to protect their credit worthiness is to regularly check their credit reports.

Why Arizona Consumers Should Regularly Check their Credit Reports for Accuracy

In addition to protecting consumers from identity theft, credit report checking allows Arizonians the opportunity to find and dispute credit score damaging errors. The Fair Credit Reporting Act (FCRA), entitles all consumers to accurate credit reports. However, credit information is frequently mishandled by creditors and credit reporting bureaus.

About 80% of Arizona credit reports are flawed in some way, so it is important to go over them at least once every 12 months. The easiest way to request copies of your credit report from TransUnion, Experian, and Equifax is through www.annualcreditreport.com. Here, consumers only need to fill out one form for all three credit reports, on a federally authorized website.

If, while reviewing your credit reports, you discover errors and mistakes, Arizona Credit Lawyers will help you remove them – for FREE.

How Arizonians can Get a Free Credit Repair Lawyer

Don’t let errors on your credit reports bring your credit score down. At Arizona Credit Lawyers, we’ve been cleaning up credit reports for consumers since 2008 for free. How do we do it? All of our fees come from the defendants in settled cases. This is why our clients pay nothing for the work we do.

Let’s start the conversation about what we can do for your credit. Set up your free consultation today by calling Attorney Gary Nitzkin at (480) 771-6001 or contact us on our contact page.