How Credit Card Cash Advances Work & What to Do Instead By Carmen Chan & Julie JaggernathCredit card cash advances are so tempting \u2013 sometimes you\u2019re in a pinch and you need to cover off your bills, pay for an emergency repair or have some spending money for the week. While cash advances might feel like an easy solution to your\u00a0financial woes, they\u2019re an expensive Band-Aid solution that could snowball into more problems. Here\u2019s why cash advances should be a last resort option and what you can do instead of turning to them the next time you\u2019re in a bind.What Is a Credit Card Cash Advance? A cash advance is cash loan from your credit card issuer \u2013 you\u2019re essentially withdrawing from your credit card account for cash. Cash advances can come in the form of withdrawing cash at an ATM, using \u201cconvenience cheques\u201d that come with your credit card, or other transactions, such as using your credit card to pay for money orders and wire transfers.Why You Should Avoid Cash Advances While cash advances are tied to your credit card, they come with a completely different set of terms and conditions, which vary between credit card companies, compared to when you\u2019re swiping or tapping for your purchases. With convenience and ease come hefty consequences \u2013 there are a handful of\u00a0reasons why you should steer clear of credit card cash advances.\u00a0They include: Expensive Fees When you turn to a cash advance, you\u2019re already incurring steep fees typically calculated according to how big your transaction is and how much you\u2019re withdrawing from your account. Typical fees could range from a fixed flat rate of, say, $5 to $10 or a percentage of the amount being borrowed, from one per cent to as high as seven or eight per cent. The fee is usually whichever of the two - a flat rate or a percentage of your transaction \u2013 is higher. If you\u2019re withdrawing from your credit card through an ATM, be prepared to face additional ATM fees too! High Interest Rates Not only do you incur fees for your cash advance transaction, but steep interest rates are tacked on, which are higher than the interest rates you pay for regular purchases on your credit card. Your cash advance shows up on your credit card statement along with your other transactions on your monthly card statement, but interest starts accruing right away. Important Credit Card Jargon and Terms to Know No Grace Period Credit cards can be a convenient tool to pay for your monthly expenses while reaping rewards points or cash back, but this method is only worthwhile if you pay off your balance in full every month. Regular purchases on your credit card come with a grace period \u2013 conventionally it\u2019s about 21 days after your statement date. Unfortunately, this perk doesn\u2019t extend to cash advances; interest rates kick in immediately. Watch out for this caveat \u2013 you could have accrued quite a bit of interest on your cash advance by the time your credit card issuer sends you your monthly statement! No Perks When used responsibly and paid in full, credit cards come with many perks, such as rewards points, cash back incentives, extended warranties, and purchase protection. Cash advances don\u2019t come with any of these benefits \u2013 in fact, because it\u2019s seen as a cash loan against your credit card, rewards points for your spending aren\u2019t even provided. 4 Ways to Tell if Reward Credit Cards are Worth It for You Limitations Credit card issuers distinguish cash advances separately from regular purchases, and with that comes a separate set of conditions when it comes to minimum payments, how much can be withdrawn from your credit card limit, and how payments are applied to cash advances, as prime examples. Your card, for instance, may only let you withdraw 20 per cent of your credit limit. 5 Reasons to Avoid Instant Payday LoansWhat To Do Instead of Using Cash Advances Read your terms and conditions carefully to ensure you\u2019re aware of the fees, interest rates, how payments work, and any penalties involved with using your credit card for cash advances. However, to avoid using cash advances try these options instead: Determine If You Really Need the Money Once you\u2019re aware of how much it will cost to take a credit card cash advance, determine if you really need the money, if you can make do without, or if you can manage with a smaller amount. Let your budget be your guide, not only to determine if you\u00a0need\u00a0the money, but how you will manage repayment. How Overdraft Protection Really Works A Private Loan from Family or Close Friends If your parents, grandparents, or other close family member or friend has the means to lend you money, working with them to draw up a private loan and concrete repayment plan would free you from steep interest rates and fees tied to cash advances. If you lay out the parameters of the loan and make repayment them a priority, this could be your saving grace. Withdraw from Your Assets If you own a home or have savings in a retirement savings plan (RRSP) or a tax-free savings account (TFSA), you could consider taking equity out of these assets to free up some cash. Talk to a financial advisor before you do so, however, because some withdrawals could lead to paying taxes and penalties. It\u2019s also always harder to save than it is to spend so taking money out of long-term savings to pay for needs now can leave you short in the long run. While taking money out of an RRSP is a debt relief option, it\u2019s one we only recommend using as a last resort. What You Need to Know Before Taking Out a Home Equity Line of Credit Ask for a Bank Loan, Consolidation Loan, Line of Credit, or Credit Card Limit Increase If you\u2019re a responsible account holder with a solid credit rating, and a positive relationship with your financial institution or creditor, you could ask for a personal loan, line of credit from your bank, or an increase on your credit card limit \u2013 a trio of options that could get you more cash in the interim. In these instances, your interest rates would be lower than cash advance rates. You might also benefit from a\u00a0debt consolidation loan\u00a0\u2013 another question to ask your lender before you take an expensive cash advance. The Hidden Danger of Using a Line of Credit to Consolidate Debt Emergency Savings Fund If you have an emergency savings account, now might be the best time to use it. If you\u2019re in dire straits financially, your emergency savings fund may be a better bail out plan than a cash advance. Just make sure to replenish this account as soon as you can!Where to Get Help With Your Debts Thinking that you need a credit card cash advance to make ends meet might just be the\u00a0warning sign\u00a0you need to heed that you need help with your debts and money.\u00a0Contact us\u00a0now and we will answer your questions and give you guidance about how to deal with your difficulties. If you would like to speak with a professional credit counsellor, we will be happy to schedule you an appointment, either in person or over the phone \u2013 whatever works best for you. Our appointments are free, confidential, and don\u2019t obligate you to anything further. The counsellor won\u2019t judge your situation or choices, just provide you with options and solutions to get you the debt relief you need. Contact us by\u00a0phone,\u00a0email, or\u00a0anonymous online chat. We\u2019re happy to help.