The usefulness of having a credit card during financial emergencies cannot be stressed enough. At times when you find yourself lacking immediate funds, you have the option to charge it to your credit card in the meantime and just pay it back later. In addition to charging transactions to your credit card, you can also withdraw money directly from your card’s credit limit through your credit card’s cash advance option.
A cash advance lets you withdraw money using your credit card, similar to how you would use a debit card. Essentially, you can look at it as a loan you take out from your credit card. This can be helpful for a variety of reasons, such as when you need emergency cash or during occasions when a store or establishment accepts cash only. However, you can only get cash up to a certain percentage of your credit, which depends on the total limit of your card. This is called your cash advance limit.
In order to make the most of this credit card feature, you need to understand what is cash advance limit in credit card accounts and other relevant information. To that end, here is a quick overview of the things you need to remember to help you better use and manage your cash advance transactions.
How Cash Advance Limits Work
A cash advance limit refers to the maximum amount of money you’re allowed to withdraw from an ATM through your credit card. Most credit card providers set this limit’s percentage lower than your credit limit. So, if your credit limit is PHP 100,000, then your cash advance limit would likely only be around 30% of that which is PHP 30,000.
There are various reasons why cash advance limits are in place. For one, it gives your credit card provider better assurance that you’ll be able to pay back the loan in the future because the amount is more reasonable compared to the entirety of your credit limit. This can also serve as a safeguard against fraudsters from maxing your credit limit in case they happen to get hold of your card. Moreover, the limit also ensures that part of your credit line still remains available for other purchases.
Things to Consider Before Getting a Cash Advance
While cash advances can be a lifesaver, they should be used responsibly to avoid putting yourself in a precarious financial situation. Before you take out a cash advance, keep in mind that they incur higher interest charges compared to regular credit card purchases. Always check your card’s terms first to see all the fees associated with cash advances. so you can avoid surprises once your credit card bill arrives.
It’s also a must to know your credit card’s cash advance limit so you can plan purchases accordingly. Remember that the amount you take out of your credit card through a cash advance will decrease your available limit. So, if you’re still planning to use your credit card for other purchases, it’s best not to max out your cash advance limit. Another thing to note when using cash advances is that most credit card providers don’t count them as transactions that can earn reward points or cashback.
Finally, consider looking into alternative options before you use cash advance. Perhaps you can borrow part of the needed funds from family and friends so you can take out a much lower cash advance, thus saving you from higher interest charges.
Using Your Cash Advance Wisely
In cases when you need to use cash advance, make sure you’re doing so wisely. For starters, keep your cash advance within a reasonable amount. Not only will it incur smaller fees, this also makes it easier for you to repay your loan. Also, limit your cash advance transactions for emergencies only or when you can be absolutely sure that you’ll be able to pay the loan in the immediate future.
Some credit card providers also allow users to toggle their card’s cash advance transactions on and off. For instance, if you’re a Maya credit card user, you can turn off cash advances via your Maya app to make sure your credit card can’t be used to withdraw money. Such a feature not only helps you regulate your cash advance transactions, it can also be a security measure against unauthorized withdrawals in case your card is lost or stolen.
Finally, it’s best to pay off your cash advance as soon as you have the funds to minimize interest charges. If possible, pay it in full when your next bill arrives so it won’t have to keep earning interest charges over the span of months.
Having a clear understanding of your credit card’s cash advance limits lets you be more mindful of how you use cash advance privileges. If you ever find yourself needing a cash advance in the future, make sure you check your limits first and follow the tips above to keep its impact to your finances to a minimum.
