Travel tip: Why a cash advance on vacation is a bad idea
You’re on vacation preparing to use your credit card for a cash advance.
Stop right there and wonder if this is an emergency that can be resolved in some other way.
That’s because the fees and interest rates on such advances can add up, said Matt Schulz, senior industry analyst at CreditCards.com, an online credit card marketplace, opened on Wednesday report released via cash credit cards.
Many credit cards used to make purchases may incur charges Foreign transaction feethat can add 5% or more to your purchase. A list of these fees can be found at Credit card’s list.
Not every transaction can be made with a credit card, and if you run out of cash and for some reason don’t have a debit card with you, you might be tempted to use the credit card’s cash advance feature.
“With a cash loan, money is basically only withdrawn from an ATM with a credit card,” said Schulz. “This is the most typical example of someone making a cash advance.”
But he added, “That comes with fees and a high interest rate, and those two things generally make it a pretty bad choice for someone under normal circumstances.”
How high Some cash advances charge 23.5% interest – “8½% higher than the average credit card, that’s 15%,” said Schulz, “a big difference”. According to the report, a bank charged 36% of the prepayments.
The other catch: the interest starts immediately, unlike the regular credit card purchase, where you have a grace period depending on the card conditions. Since you are away from home, you may not even think about paying it off right away.
All in all, a cash advance isn’t the best financial move unless circumstances warrant it. We often ask people to wear multiple financial instruments when traveling, but that should be the last thing out of the toolbox.
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