Credit card companies offer cash, one way is to get money from your available balance. Even though it sounds like a convenient way to get access to cash, taking a prepayment on your credit card is risky, expensive, and carries the potential for debt if you can’t quickly repay the advance amount. Knowing that before you swipe your credit card at the ATM can help you make better decisions about the way you use a credit card prepayment – if you have one at all.
Four costs of a merchant cash advance
merchant cash advances come with a prepayment fee, which is typical with a minimum of $ 10 around 5% of the advance. Not only that, merchant cash advances have higher interest rates than regular purchases and even balance transfers.
Most credit cards offer no grace period for merchant cash advance interest rates begin as soon as you take the money out of the ATM. And don’t forget about the ATM fee the bank charges you if you don’t use a credit card within that bank network.
These four costs can make merchant cash advances extremely expensive, but still less expensive than some alternatives, such as payday loans. Managing merchant cash advance fees is key.
Smart Ways handle a merchant cash advance
While merchant cash advances credit card is generally a bad idea, there may be times when you need access to cash and have no better options. If you need to take a merchant cash advance on your credit card, follow these tips to reduce the cost and risk of getting into debt.
Read your credit card contract to understand the terms and fees. You need to know the one-time prepayment fee you pay and the April that will be applied to your prepayment balance. If you do not understand something, call customer service and ask.
Use a prepayment for real emergencies that you don’t pay for with your credit card. Avoid paying a merchant cash advance for normal everyday things like food and gas. Make a goal of building an emergency fund so that you won’t have to rely on a merchant cash advance in the future.
Know Your Prepayment Limit; it is probably less than your credit limit. You can check your limit on your online credit card account or by calling the automated customer service number on the back of your credit card. Exceeding your prepayment limit may result in fees beyond the limit and higher interest rates.
Do not take what you need anymore. Avoid the temptation to withdraw just a little more so that you have a little more money. That little bit extra just makes it harder to refund progress. But try to be big enough to only take one prepayment to cover your expenses to avoid another prepayment and ATM fee.
Use a credit card with a zero balance. Purchases, Prepayment, Balance Transfer – If you have multiple types of credit on a credit card above the minimum each payment goes to the higher balance rate. Meanwhile, the other balance, such as purchases, has not decreased and instead is gathering interest. This makes it more difficult to refund the prepayment balance.
Avoid making purchases until the prepayment is repaid for the same reason as discussed above. You should also avoid making credit card purchases until you can afford a credit card balance.
merchant cash advance alternatives
The need for quick money is often a symptom of a major money management problem, such as spending extra money or missing an emergency fund. In such cases, repayment in advance could take a long time and cost a lot of money.
Before you decide to take an advance payment, take a look at some alternatives.
- Small loans from your bank or credit union
- Small loans from a family member or friend
- Payday advance from your employer
- Maturity extension from your creditors
- Consumer credit advice
- Local emergency programs (usually offered by your local human resources department)
- merchant cash advance proof your finances
Because of the cost, you want to avoid the need to take a prepayment. Start building an emergency fund. Contribute as much as possible to savings until you’ve built a substantial emergency fund. Adjust your spending habits to eliminate debt and get your finances back on track. After all, you minimize your credit card debt only by collecting what you can afford.