Credit cards are often considered to be a necessary component of one’s personal finances. They offer consumers a number of advantages. As a consumer, you should know the pros and cons to reap the benefits and not fall prey to the dangers. Many companies offer credit card checks and cash advances. While considered highly convenient, these offers might come at a high cost. Continue reading to learn more.

Writing out a Credit Card Check

What are the Benefits of Having a Credit Card?

Not everything related to credit cards is bad. Before we delve into the high costs associated with credit card company checks and cash advances, we feel it best to start by sharing a few of the ways you can reap rewards from owning a credit card. These include the following:

  1. Credit cards are an effective method of building a credit history and improving an individual’s credit score.
  2. Credit cards are typically much safer to carry and use than cash.
  3. Credit cards are accepted almost everywhere and allow instant access to funds that are available on the card; therefore, making them highly convenient.
  4. Credit cards that do not include an annual fee allow you to get an instant short-term loan that will not result in interest charges if you repay the balance prior to the end of the grace period.
  5. Credit cards are highly beneficial if an emergency arises and you do not have a backup emergency savings fund that includes at least 6 months’ worth of income.
  6. Most credit cards offer awards and perks to customers. These include – but are not limited to – cash back, retailer discounts, and price protection.

What are Credit Card Checks?

Credit card checks – which may be referred to as “access checks” or “convenience checks” – are a type of blank check your credit card company mails to you. You may fill it out for up to the amount that the company has designated and cash it. It acts as a type of easy loan. In short, you use the credit card check to tap directly into your line of credit to make a purchase or to make a check out to yourself.

What are the Dangers of Using Credit Card Checks?

If you elect to use a credit card check to make a purchase or to make out to yourself to get cash, you will typically have to pay a fee. This may be a flat-rate fee, such as $10.00, or it may be a percentage fee, such as 5% of the amount.

In most instances, the credit card company will charge you the highest of the two.

Immediately thereafter, you will start incurring interest charges. The rate for interest charges on a credit card check could be 25%, or higher.

What Do the Major Credit Card Companies Charge for Credit Card Checks?

The following outlines a few of the major credit card companies and what they charge for credit card checks – which may also be referred to as a “cash advance”:

  1. Capital One – The basic fee is 3%, with the minimum amount charged is $10.00. The interest rate is up to 25.90%.
  2. Citi – The basic fee is up to 5%, with the minimum amount charged is $15.00. The interest rate is up to 29.99%.
  3. USAA – The basic fee is 3%, with the maximum amount that can be charged being $200. The interest rate is up to 29.90%.

So, let’s say you wrote a $200 credit card check from Capital One. The 3% would not be charged as that only comes to $6.00. You would be charged a minimum of $10.00.

Then, they would tack on the interest rate of 25.90% on the $210 balance that you are up to after the minimum fee is added. You are now up to $264.39.

If you do not pay this off before the grace period ends, you will continue to be charged the 25.90% interest on your balance. This can rack up a large bill quite quickly.

What is a Credit Card Cash Advance?

A credit card cash advance is when you withdraw cash from the credit card account that you have. This withdrawal is the same as borrowing against a credit card in order to get your hands on actual cash.

While it does provide you with a short-term loan, there are long-term and highly expensive consequences involved.

You will have to pay a cash advance fee and a very high interest rate. Most cash advances will accrue interest right from the day you receive the money, and it may end up costing you a lot more than you bargained for.

Are Credit Card Checks and Cash Advances the Same Thing?

In most instances, a credit card check and a cash advance are the same things when obtained from a credit card company. Most companies use the terms interchangeably. However, many companies have started to separate the terms and have them outlined as two different things.

For example, you may be able to write a credit card check for the amount of credit that you have available, but if you want a cash advance, it may be a lower amount that you have access to.

For clarification, be sure to consult your credit card company.

bank account

Are There Better Alternatives to Credit Card Checks?

Yes, there are many better alternatives to credit card checks.

First, you may open a checking account and a savings account at a reputable bank. Ensure that you place a percentage of your income into your savings account on a regular basis. This way, if an emergency occurs or you need to make an unexpected purchase, you may use cash that you have saved instead of costly credit card checks or credit card cash advances.

Additionally, most banks will give you short-term and long-term loans that do not result in the high fees and interest rates that credit card checks and cash advances have.

Do Credit Card Checks and Cash Advances Hurt Your Credit?

The check and/or advance that you receive from a credit card company will not directly impact your credit score. Unfortunately, it does indirectly hurt it in that it increases your outstanding balances on your credit. In turn, this increases the credit utilization ratio.

If possible, it is best to avoid using credit card checks and cash advances. If you use a credit card for a purchase, ensure that you pay the balance off completely prior to the end of the grace period provided. If you do this, credit card usage will actually help you build your credit.

Contact Us Today

If you have financial needs, we here at Somerville Bank are capable of assisting you. We can help you with a multitude of banking services that will help you gain control of your finances, and not lose control of your finances. We can help you set up a checking account, online banking, mobile banking, standard savings accounts, and even savings accounts designated for emergencies.

Somerville Bank has well over 113 years of experience in the banking industry. We strive to ensure that each client is serviced with the tools and resources that they need to ensure financial livelihood. We have many different locations as we believe that our clients should have convenient access. For more information, you may contact us at one of our locations today: