Credit Card Cash Advances are Expensive. Try These Alternatives

Some of the links in this post are from our sponsors. We
provide you with accurate, reliable information. Learn more about

how we make money and select our advertising partners
.

So, you need $1,000 to pay the rent or repay a loan, but you
don’t have it. What do you do? You might consider a credit card
cash advance.

It’s quick money, yes. But it’ll cost you. The average cash
advance fee is close to 5%, according to
CreditCards.com
. And the average interest rate is over 24% —
6% higher than for purchases. 

If you pay back that $1,000 cash advance in two months, you’ll
pay an extra $90, which amounts to an effective APR of 54%.

Ew. 

But there are ways to get that money for much less. Sometimes
you can even get close to a zero-cost cash advance, or just skip
the cash advance altogether. 

5 Ways to Avoid a Credit Card Cash Advance

Here are five strategies for avoiding an expensive credit card
cash advance. 

1. Transfer the Balance to a Zero-Interest Credit Card

 If you’re in the good habit of paying off your credit card
balances each month, now might be the time to make an
exception. 

Rather than pay cash-advance fees and interest, transfer a big
balance to a card that offers zero interest for a while, and use
the money that would have paid off the card as your cash
advance.

Even better, make it one with no transfer fee.
Chase Slate
has recently been offering 15 months of zero
interest and no transfer fee.

2. Use a Credit Card to Pay

 What do you need the cash advance for? 

Odds are, it will cost less to just pay with a card, and there
are services that let you pay almost anything by credit card now.
The fees they charge are almost always are less than cash advance
fees, and you pay the lower purchase-based interest rate instead of
the cash advance rate. 

Here are some examples:

  • Rent: You can pay rent with a credit card
    through RentMoola or
    Place. They
    make arrangements with landlords or send a check. If you have
    roommates, you can even split rent and pay with two cards. These
    companies charge you up to 2.99% in service fees.
  • Income Taxes: The IRS lists companies
    authorized to process tax payments by credit card
    . You can use
    these services to pay your annual tax bill or quarterly payments if
    you have a business. As of August 2019, the cheapest option carries
    a  1.87% fee.
  • Property Taxes: Plastiq will process your property
    tax payment by credit card. It charges 2.5%.
  • Tuition: You can also pay your tuition bill
    through Plastiq

An illustration of a dollar being stretched3. Load Prepaid Debit Cards With Gift Card Balances

Retailers sometimes have debit gift cards on sale. For example,
OfficeMax has offered $20 off the purchase of at least $300 in Visa
gift cards. So two of their $200 cards, which normally cost $206.95
(there’s a $6.95 fee) would be $393.90. Do that three times and
you have $1,200 in Visa gift cards for $1,181.70 total.

You can then convert them into cash using prepaid debit cards.
Load prepaid debit cards — like Amex Bluebird or Serve — with
the money on your Visa or MasterCard gift cards. (Here’s
a tutorial
that explains how to do it at a Walmart MoneyCenter
Express kiosk.) Once you’ve loaded them, you transfer the money
to your bank account, getting your hands on your cash
advance. 

If you don’t find a sale, the usual $6.95 fee is about 3.5% of
a $200 debit gift card, which is probably still less than a typical
cash advance fee.  

4. Get a Short-Term Loan From a Low-Income Credit Union

Like a credit card cash advance, a payday loan can be tempting
when you’re in need of cash. But instead of making either of
those costly moves — and opening yourself to the possibility of
paying double- or triple-digit interest on your $1,000 loan —
look into joining a low-income
credit union
.

These credit unions receive federal low-income designations when
the majority of their members earn less than 80% of the median
income for their metropolitan area. They provide financial services
to people who could otherwise not access them, including loans that
are specifically structured to help borrowers avoid the traps of
traditional payday loans. 

This option may take a bit more effort than some of the others
on this list, but it’s worth exploring, especially if you have a
poor credit history (or no credit history at all). A loan like this
could provide you with the first steps toward rebuilding your
credit.

To find one of these credit unions, use the National Credit
Union Administration’s Credit
Union Locator tool
to search for credit unions in your area.
When you find one, click on the name of the credit union, and then
click the link labeled “Research This Credit Union.” The detail
page will tell you whether the credit union has a low-income
designation.

An illustration of a woman chasing money dangling from a stick.5. Get Paid for Your Work Without Waiting
for Payday

You don’t have a ton of options when you’re stuck in the
paycheck-to-paycheck cycle. But you’re not totally out of
luck.

A free app called
Earnin
allows you to get access to your paycheck anytime you
want — without waiting for payday.

Say you clocked five hours today. Whether you’re an hourly,
contract or salaried worker, you can log into Earnin and get paid
for those five hours. Because Earnin doesn’t want you to
overdraft, you can take out up to $100 per day or $500 per pay
period.

The service doesn’t charge a fee — or crippling interest
rates. Earnin simply asks you to pay what you think is fair.

To
use Earnin
, you’ll need to meet a few requirements. You
should:

  • Receive direct deposits from your employer into your checking
    account.
  • Have a regular pay schedule (weekly, bi-weekly, semi-monthly,
    monthly).
  • Work at a fixed location or use an online timekeeping system at
    work. This helps Earnin confirm that you are, indeed, working.

Is All This Worth the Trouble?

If you pay it back in a month, a $1,000 credit card cash advance
will typically cost 5% upfront ($50) and 2% interest for the month
($21 on the total balance of $1,050). That’s a total cost of $71,
and some of the strategies above may only cut that cost in half. So
is it worth it?

You can decide that based on your own situation. 

If you can’t pay back that cash advance quickly, these
strategies become more valuable. You’ll typically be paying an
interest rate that’s 6% less than the normal cash advance rate.
That saves you money every month

Steve Gillman is the author of “101 Weird Ways to Make
Money” and creator of EveryWayToMakeMoney.com. He’s been a
repo-man, walking stick carver, search engine evaluator, house
flipper, tram driver, process server, mock juror, and roulette
croupier, but of more than 100 ways he has made money, writing is
his favorite (so far). Editor Caitlin Constantine contributed to
this report.

This was originally published on
The Penny Hoarder
, which helps millions of readers worldwide
earn and save money by sharing unique job opportunities, personal
stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder
as the fastest-growing private media company in the U.S. in
2017.

Source: FS – All-News2-Economy
Credit Card Cash Advances are Expensive. Try These Alternatives