Comments on: Cash Advances on Credit Cards

By: Russ Barthel

Russ Barthel — Tue, 26 Jan 2010 18:08:00 +0000

On February 17th 2010, the rules change. The new rule is that payments over the minimum due will be applied to the charges that incur the highest interest rates. Since rates on cash advances are typically higher than that of purchases, payments made after the 17th will pay down the cash advance balance first.

By: Dan Maxey

Dan Maxey — Tue, 26 Jan 2010 15:02:00 +0000

My old man (who can count then number of times he has used his credit card on one hand) not only paid his balance in full (when he had one), but always sent in a few cents extra. That meant that the credit card company was always in debt to him. This torqued them off to no end, and they were always sending him notices to stop it. They even cut him a check for seven cents once (which he never cashed just to keep it on their books awhile), but he immediately sent them a “payment” of eleven cents (which the processing department dutifully deposited) that started the cycle all over again.

By: Gruff999

Gruff999 — Tue, 26 Jan 2010 13:33:00 +0000

In the U.K. the offers are for very low interest rates on balance transfers from other cards. As discussed already you still pay the big % rates on anything else you put on, and it is those purchases that get paid off first.

I have enough trouble with the small print from I.S.P.'s. £6 a month for broadband and phone*!!!

(for the first 3 months, then £14.99 a month thereafter, requires a telephone line at £11.49 a month).

By: fzz

fzz — Mon, 25 Jan 2010 17:02:00 +0000

While the most efficient way to handle this is not using the card for anything else until its balance returns to zero for two statements (so not use it for 3 months), the other alternative is paying off the loan (that’s what a cash advance is) as soon as possible, then pay it off again. That is, pay enough so you achieve a credit balance. Yeah, you overpay, but you ensure you end the loan payments. At least the overpayment applies to your subsequent statement balance.

By: zach

zach — Mon, 25 Jan 2010 16:03:00 +0000

There's no rule stating you can't make a payment at any point during the month. If you must take a cash advance, send in a payment as soon as you can. Add a couple of percent extra as a safety next and you'll be fine, except for the 3-5% fee you were soaked with at the beginning.

Of course, that's assuming you're not already carrying a balance. If you are already carrying a balance, you can still indicate which balance you want your payment applied to. It defaults to paying off the balance that makes the least for the bank, but if you tell them to apply it to the cash advance balance first, they have to honor your request.

By: Kevin

Kevin — Mon, 25 Jan 2010 14:58:00 +0000

The only caveat is that the purchase balance would have interest applied at a different rate. Additionally, you need to show the number of days in the billing cycle.

By: Kevin

Kevin — Mon, 25 Jan 2010 14:56:00 +0000

Most people are unaware, including myself, of point #3.

Thanks for this information.

By: Michele

Michele — Mon, 25 Jan 2010 14:55:00 +0000

Thankfully, I can say that I never knew this. But, prior to this post – I wouldn’t have been against doing it, in say, an out of town need like you stated.

By: Bob Phillips

Bob Phillips — Mon, 25 Jan 2010 14:36:00 +0000

You obviously don't read the terms and conditions to know about #3.

Knowing how it works, if you MUST take a credit card cash advance, you have to calculate the interest accrued since the statement date and the payment date, add a good safety margin, at least 10%, and then pay that amount regradless of the statement amount. If you use the card monthly, the overpayment will get absorbed the following period.

But, as you rightly note, it is a mug's game and quite honestly, is clearly a casewher government should legislate. It is immoral, besides being grossly inflated rates, it plays upon people's lack of knowing the allocation rules, an inability to realise that the bill is actually higher than the statement, and an inability to calculate that increase.