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• A credit card cash advance is money you borrow from your credit card’s credit limit. You can either withdraw it from the ATM or head to the bank to withdraw it.
• While a cash advance is quick and easy, it comes with very high interest fees – expect to pay an APR of 25% or higher, with no grace period before you start accruing interest.
• Credit card cash advances can also affect your credit utilization, a major factor that determines your credit score.
• If you need extra cash to pay the bills, consider carrying a balance on your credit card instead. You’ll usually pay a lower APR, and if you’re lucky you could even take advantage of an introductory APR offer.
• Also consider your options for deferring payments. Many lenders are currently offering their customers flexibility with payments.

With more than 20 million people filing for unemployment recently, paying the bills is a struggle for many. And if you don’t have an emergency fund, you may be turning to other options to make ends meet.

If you’ve lost a source of income or are otherwise unable to pay off your accounts, the opportunity to take out a cash advance on your credit card could also seem like a viable option. But is it? Here’s what you need to think about before you turn to your plastic.

High APR

First, the interest rate is going to be high, as much as double the rate that it is on your credit card, says Adrian Nazari, CEO of Credit Sesame, a credit and loan company. For many popular credit cards, the cash-advance APR is 25% to 27% percent. You won’t have a grace period, meaning you immediately accrue interest.

Additional fees

Your credit https://paydayloansohio.net/cities/eaton/ card issuer will likely charge you an additional fee (typically 3% to 5% of the total amount advanced, with a $10 minimum), he says. And if you use an ATM that isn’t affiliated with your credit card, you’ll rack up even more fees.

“We see many borrowers have the amount they owe on the card balloon substantially after a cash advance, eating into available credit and putting them at risk of additional fees and larger monthly payments,” says Jeremy Lark, senior manager of operations for GreenPath Financial Wellness, a provider of debt management and counseling.

It could affect your credit score

Understand, too, that adding to the balance to your credit card will increase your credit utilization and work against your credit score. The higher your credit utilization, the bigger the negative impact on your credit score, since your amounts owed accounts for 30% of your score.

No safety net if your money is stolen

You’re out of luck if your cash advance money is lost or stolen. You don’t have the safety net you’d have if there was an unauthorized transaction on a credit card.

T0p alternatives to a credit card cash advance

You get that a credit card cash advance shouldn’t be your first option when an emergency rises. But you still need money in your pocket. There are a couple of other choices to consider.

Carry a balance on your card

Charging on your credit card is probably a better idea than getting a cash advance. Bob Castaneda, program director for Walden University’s MS in Finance program, says, “It’s more beneficial for people to make regular transactions instead of getting a cash advance, due to lower interest rates and the potential of earning reward points.”

If you have a credit card that offers an introductory APR period, you could be able to avoid interest fees for a period of time. If you don’t, it could be worth applying for a credit card like the Citi® Double Cash Card or the Citi Simplicity® Card, though note that issuers have been tightening their approval standards recently so it may be challenging to get one of these cards now.

Reallocate funds

See if you can get deferments on other bills like student loans or mortgage payments. Given the pandemic, many lenders are open to such arrangements.

Consider a personal loan

See if you can get a personal loan through a credit union. Their interest rates are typically a bit lower. Says Lark, “Even a loan that is installment vs. compound interest like on a credit card can be a smart play if accessible and save quite a bit of money on interest in the long run.”