Cash Advance Consequences for Convenience

Created on 2008-04-10 02:55:33

How many times has this happened to you? The coolest pair of shoes that have ever graced the planet are actually available in your size, and there is only one thing stopping you from whisking these babies’s on to your feet, cash. While we wait for that executive position with the corner office to appear, there can be times when a small cash advance will help facilitate those pressing wardrobe requirements.

In today’s world, finding a cash advance is easier and safer. No longer is it necessary to head downtown to a loan shark in a crumpled suit with a roll of twenties. Cash advance facilities can be found in most towns and cities, depending on local state regulations. Of course, there is a downside to this convenient service they offer. Unlike a normal loan that any bank offers, the cash advance is a more costly way to borrow money.

The cash advance is generally a short-term loan, usually no more than a couple of weeks, and for this, the cash advance company has a finance charge that can range from $10 to $50 per $100 that you borrow. So it may not be the end of the world, but that charge can be equivalent to 260% to 1300% annual percentage rate (APR). Considering that a store credit card can be as expensive as 30%, the cash advance loan may not be the wisest financial move you ever made.

In addition to the initial charges that the cash advance lender makes, there are other fees that can add to your financial dilemma. If you use the loan to buy those shoes and find that you cannot pay the advance back by the date required, there can be further charges. If you gave a post-dated check to the cash advance company, they may then go ahead and cash your check.

Assuming that you borrowed the cash because your bank balance was a little depleted, a bounced check will incur a charge from the cash advance company and a nice letter from your bank informing you of a non-sufficient funds charge of $45, further reducing your bank balance.

So why use a cash advance to borrow a small amount of cash? It is a convenient way of obtaining instant funds when you have got to have any mula. There are downsides of cash advances, but like everything else in life, you have to be smart and know the risks.