08 Mar 2008 12:28:06 | Lee Asher
Once you've got a credit card, you'll find that you can do much
more with it than just chalk up credit. You might be sent a
credit card chequebook, for those times when you're paying
someone who can't accept your card.
You might also be offered cash advances - a way of withdrawing
cash directly from your credit card, either to your bank account
or from a cash machine. This is designed for when you need cash
in an hurry. There are a number of reasons not to overuse these
functions and here's why.
A Higher Interest Rate
With most cards, cheques and advances are charged at a much
higher rate of interest than normal spending. You often give up
any interest-free period (which can be up to two months),
meaning that you start paying interest on the money literally
from the minute you spend the money. Not only that, but most
cards will also charge a fee each time you use cash advances or
credit card cheques - and using an ATM may increase the fee even
further.
It Marks You Out
When you use a credit card cheque or accept a cash advance,
you're showing that you're not just using a credit card for
convenience - you really need the money. This marks you out in
the credit card company's records as someone who shouldn't be
given a good deal. After all, you won't be going anywhere.
Spend With the Card Instead
Instead of using cash to pay for small things and finding you
have to take advances or use cheques to pay for bigger things,
it's better to do it the other way around. If you're in a
situation where you're relying on advances, you should start
using your card for smaller things where you wouldn't usually
bother, just to avoid taking the advances and paying more
interest. Be strategic in how you spend.
Remember that there are very few bills now that must be paid for
by cheque, so there aren't many reasons to ever use credit card
cheques. If you're willing to call them up and wait in their
queue for a while, the chances are you can get them to accept a
credit card payment just by you reading the number.
Look Out for Cash Advance Limits
If you start relying on cash advances, sooner or later you'll
probably run into an advance limit. The credit card companies
don't advertise it, but many of them have limits on how much of
your balance can be cash advances and how much must be in
purchases. Try to find out these limits before you start taking
advances.
Remember They Get Left For Last
When you pay back your credit card debt, most lenders will put
your payments towards the lowest-interest money (your purchases)
first, and then towards other lending. That means that you keep
paying that high interest on the cash advance or cheque until
you get your balance all the way down to zero. Very sneaky
indeed.
About Author :
