How to save money on credit
cards
by: Paul Davis
Some credit cards offer a cash
advance option. But how good a deal is this?
Not very. In fact, it can be
downright expensive.
Why?
Because every time you use your
credit card to withdraw case, more fees kick in:
Cash
advances can carry an upfront fee of 2 percent to 4 percent of the
amount advanced.
The advances have a higher
interest rate than regular card charges.
Interest charges begin to
mount as soon as the money comes out of the ATM.
Many issuers also require you
to pay down the balances for purchases before you pay down the
higher-interest cash advance balance.
Here's an example of how these fees
kick in:
Assume you bought a television for
$500 on your card and then took out $50 in cash. Even though you pay
the $50 back the next day, you still lose your interest-free period
because the credit provider deems you pay the cash back last.
As a result you will still owe the
$50, but you will now only owe $450 on the $500 worth of purchases.
You'll continue to forfeit your
interest-free period up until you have completely paid back the full
$550. Any future purchases will still be ahead of the $50 in the
payback line.
The
lesson is simple: Avoid using your credit card to withdraw cash
wherever possible. You'll save money as a result!
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