How to Pay Off Cash Advances

Find strategies to pay off cash advances with zaving, maintaining financial stability and lowering interest costs.

Last updated by Zaving Editorial Team, on January 18th, 2024

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What are cash advances and how do they work?

“Cash advances serve as immediate loan options provided by credit card issuers or select financial institutions, allowing cardholders to withdraw cash against their credit limit, often accessible through ATMs or bank transactions. However, this rapid cash access often leads to immediate interest charges, usually at higher rates than standard credit card transactions.

When obtaining a cash advance, you're borrowing against the available balance on your credit card. Unlike regular credit card transactions that may have a grace period before interest accrues, cash advances usually initiate interest accumulation right away. The amount available for withdrawal depends on your credit limit and the specific cash advance limit set by your card issuer.

Furthermore, cash advances often involve extra fees, such as ATM charges, cash advance fees (typically a percentage of the withdrawn amount), and potentially higher interest rates compared to standard credit card transactions.

Understanding that cash advances tend to be considered expensive options due to their higher fees and immediate interest charges, it's recommended to use them sparingly and primarily for immediate needs, considering their elevated costs relative to other borrowing methods.”

How do I pay off cash advances?

“Paying off cash advances typically involves clearing the outstanding balance on your credit card, which includes the cash advance amount along with any associated fees and interest.

Here's how to handle it:

  • Check your statement: Review your credit card statement to identify the cash advance transaction and understand the total amount owed.
  • Prioritize repayment: Allocate funds to clear the cash advance balance as soon as possible. Since cash advances often accrue higher interest rates than regular purchases, paying them off swiftly helps reduce additional interest charges.
  • Make timely payments: Ensure you make at least the minimum payment required by the due date to avoid late fees and negative impacts on your credit score.
  • Consider paying more than the minimum: If feasible, aim to pay more than the minimum amount due. This helps reduce the principal balance faster, saving you money on interest in the long run.
  • Monitor your statements: Keep an eye on subsequent statements to ensure the cash advance balance has been paid off and verify that no additional interest or fees have accrued.
 

By proactively managing your payments and repaying cash advances promptly, you can minimize interest charges and maintain better control over your overall credit card balance.”

Can cash advances affect my credit score?

“Cash advances may indirectly impact your credit score based on how you manage them. They don't have a direct effect, as they're typically not reported as separate entries to credit bureaus.

However, several factors related to cash advances can influence your credit score:

  • Credit utilization: Cash advances increase your outstanding credit card balance, potentially raising your credit utilization ratio. High utilization ratios can negatively impact your credit score.
  • Late payments: Missing payments or defaulting on cash advances can lead to late fees and reflect negatively on your credit report, affecting your score.
  • Debt accumulation: Cash advances often come with high fees and interest rates. Accumulating substantial debt through these advances could impact your ability to manage finances effectively, indirectly affecting your creditworthiness.
  • Credit history: Your credit score considers your overall credit history, including the types of credit accounts and payment patterns. Consistently relying on cash advances might indicate financial instability.
 

To mitigate any potential negative impacts, use cash advances sparingly, pay off the balance promptly, and avoid missing payments. Regularly monitoring your credit report helps identify any discrepancies or errors that could affect your score. Ultimately, responsible use of cash advances and maintaining healthy credit habits can minimize their impact on your credit score.

More of your frequently asked questions about payday loans

Are there restrictions on how I can use a cash advance?

Yes, cash advances frequently have usage restrictions set by lenders. These restrictions might include capped withdrawal amounts, usually tied to a percentage of your credit limit, and limitations on certain activities like gambling or investment purchases. Focusing on using cash advances for immediate financial needs is advisable due to their higher fees and interest rates.

Can I get a cash advance if I have bad credit?

It's feasible to get a cash advance with bad credit, although it might be more challenging. Some lenders might still extend cash advances despite poor credit, but they could apply stricter terms, lower limits, or higher fees. Considering alternative lending sources, like payday loans, might be an option, but remember the typically higher interest rates and fees.

Can I pay off a cash advance early without penalties?

Whether you can pay off a cash advance early without penalties relies on your lender's terms. While some lenders facilitate early repayment without penalties, offering the opportunity to save on interest by settling the advance sooner, others might stipulate fees for prepayment. Reviewing your agreement or contacting your lender will clarify if early repayment involves additional charges.

What are the rates and fees associated with cash advances?

Cash advances bring forth increased fees and elevated interest rates in comparison to standard credit card purchases. Typically, you'll face an initial fee ranging from 3-5% of the withdrawal amount, alongside interest rates ranging between 25-30% APR, contingent upon your creditworthiness and the lending institution. It's vital to comprehend that these cumulative charges can rapidly mount, rendering cash advances a notably expensive choice.