Some credit cards offer a cash advance option. But how good a deal is this? Not very. In fact, it can be downright expensive. Why? Because every time you use your credit card to withdraw case, more fees kick in: * Cash advances can carry an upfront fee of 2 percent to 4 percent of the amount advanced. * The advances have a higher interest rate than regular card charges. * Interest charges begin to mount as soon as the money comes out of the ATM. * Many issuers also require you to pay down the balances for purchases before you pay down the higher-interest cash advance balance. Here's an example of how these fees kick in: Assume you bought a television for $500 on your credit card and then took out $50 in cash. Even though you pay the $50 back the next day, you still lose your interest-free period because the credit provider deems you pay the cash back last. As a result you will still owe the $50, but you will now only owe $450 on the $500 worth of purchases. You'll continue to forfeit your interest-free period up until you have completely paid back the full $550. Any future purchases will still be ahead of the $50 in the payback line. The lesson is simple: Avoid using your credit card to withdraw cash wherever possible. You'll save money as a result!
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