First off, there is a 99% chance of being charged a cash advance fee. Of the over 70 credit cards covered on Credit Card Depot, I could not find a single card that charged less than a 2.9% cash advance fee. Some cards even impose a $10 minimum fee. That means the cash advance fee can be 5-10% if you are only taking $100 or $200. Taking out less than $300, therefore, can be expensive.

Now, unless you take advantage of a 0% interest cash advance offer, you will also be charged a higher interest rate on the money you take out. For example, a very popular credit card with a variable 11.24% interest rate on purchases charges 23.49% on cash advances. This is not the exception, but the rule. Regardless of your credit, you will likely be charged 23% or higher on your cash advance balance.

There’s another sticky issue here. When you repay your credit card, your dollars go first to the balance that is being charged the lowest interest rate. For example, let’s say you have a $2000 balance from purchases at 11.24% and a $1000 balance from cash advances at 23.49%. Until you have paid off the $2000 from purchases, you will continue to pay the higher interest rate on your cash advance. This is an unfortunate trap many cash advance users fall into.

Now, there are ways to limit the expense of taking a cash advance from your credit card. First, you can find offers that will give you a 0% interest rate for 1 year. At the end of that year, you can pay the cash advance balance in full or, if your credit is good enough, transfer that balance to a 0% balance transfer credit card. However, if you do not repay the cash advance, you will get hit with an interest rate in the mid to high 20% range. Also, you may be charged a balance transfer fee.

If you have a balance on your current credit card, it is probably better to get a new credit card for your cash advance to avoid the messy interest rate situation having purchases and cash advances on the same card creates. Also, if you cannot repay the cash advance in a short period of time, you could transfer the balance to your current credit card and pay a much lower interest rate on your cash advance.

Taking a cash advance from your credit card does cost money. However, the wise use of a cash advance can limit the astronomical expense taking a cash advance often entails. By taking interest rates, cash advance fees, and the fact that paying off a cash advance on a credit card with a balance is not that easy into consideration, one can effectively use a cash advance credit card without falling prey to the traps in your credit card’s fine print.

©2006, Credit Card Depot Inc. This article may be reprinted as long as a live link to http://www.credit-card-depot.com remains intact.

The author is President and CEO of Credit Card Depot Inc, an online credit card comparison site, featuring over 70 current credit card offers, including 0% cash advance credit cards. At Credit Card Depot, you can compare credit card applications and apply online for instant credit card approval.

Article Source: Jeff Weber

Scott Bilker -- founder of DebtSmart.com and the author of Talk Your Way Out of Credit Card Debt, Credit Card and Debt Management, and How to be more Credit Card and Debt Smart -- answers your questions about money, credit, loans, mortgages, or debt, to him at: Scott Bilker, PO Box 563, Barnegat, NJ 08005-0563 or send your question online at: www.DebtSmart.com/askscott

Learn more about Scott Bilker's helpful book: "Talk Your Way Out of Credit Card Debt!: Phone Calls to Banks That Saved More Than $43,000 in Interest Charges and Fees"

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