January 31, 2007

Dissecting the Cash Advance Fee

Cash advances are expensive – so much, in fact, that many an unwitting cardholder has been surprised when they find out that the fees and interest on one often add up to just as much as the amount they withdrew! These fees may be a standard amount, or a percentage of the amount of the cash advance. For example, you may see the cash advance fee stated as thus: “3%/$15.” You will pay whichever of these is higher – meaning that, up until a cash advance of $500, you’d pay $15, no matter what the amount is, and 3% of anything over that amount.

Banks have the right to limit how large of a cash advance may be withdrawn per day or per transaction. Depending on your issuer, your cash advance fees may be taken out of the amount you withdraw, or they may be posted as a charge to your account. Either way, they are often even more expensive than at face value – cash advances generally have no grace period, so you’ll be charged interest on them from the day they occur. At pretty much any interest rate, that’s a costly withdrawal indeed!

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