At O1ne Mortgage, we prioritize educating our clients about financial matters to help them make informed decisions. One crucial topic is understanding cash advances and how to avoid them. This article will delve into what constitutes a cash advance, the associated costs, and how you can steer clear of these expensive transactions.

What is a Cash Advance?

A cash advance allows you to use your credit limit to access cash. While it might seem convenient, it is significantly more expensive than using your credit card for regular purchases. Cash advances come with high-interest rates and additional fees, making them a costly option.

7 Transactions That Are Considered Cash Advances

Many transactions might not immediately seem like cash advances but are treated as such by credit card issuers. Recognizing these transactions can help you avoid unnecessary fees and high-interest rates.

1. Using a Convenience Check

Credit card companies often send convenience checks in the mail. When you use these checks to transfer a balance or deposit cash into your bank account, it is treated as a cash advance.

2. Buying Lottery Tickets or Gambling

Purchasing lottery tickets or engaging in gambling activities, including online gambling and casino gaming, are considered cash-equivalent transactions. Credit card issuers treat these purchases as cash advances.

3. Buying Foreign Currency

While making purchases in foreign currencies is generally fine, buying foreign currency or cryptocurrency with your credit card is treated as a cash advance. Use a debit card or cash to avoid these fees.

4. Wire Transfers

Using a credit card for wire transfers involves using the issuer’s funds to transfer money, making it a cash advance. Opt for other methods to avoid high costs.

5. Money Orders

Purchasing money orders with a credit card is treated as a cash advance. Some locations may require you to take out a cash advance first, further increasing costs.

6. Person-to-Person Money Transfers

Sending money through apps like Venmo, PayPal, or Cash App using your credit card is considered a cash advance. This is because you are essentially transferring money using your credit card.

7. Overdraft Protection

Using your credit card for overdraft protection on your checking account is treated as a cash advance. The issuer transfers cash to prevent overdrafts, incurring high fees and interest.

How Much Does a Cash Advance Cost?

Cash advances come with high-interest rates, often higher than those for regular purchases. Additionally, there are fees associated with cash advances, including a percentage of the amount advanced or a flat fee, whichever is higher. These costs can add up quickly, making cash advances an expensive option.

How to Avoid a Cash Advance

To avoid the high costs associated with cash advances, consider the following tips:

• Use a debit card or cash for transactions that might be considered cash advances.
• Plan your finances to avoid the need for quick cash.
• Explore other borrowing options, such as personal loans, which may have lower interest rates.

The Bottom Line

Understanding what constitutes a cash advance and how to avoid it can save you from high-interest rates and costly fees. At O1ne Mortgage, we are committed to helping you make informed financial decisions. If you need expert mortgage services, call us at 213-732-3074. Our team is here to assist you with all your mortgage needs.