The Pros and Cons of Taking a Cash Advance

When you're in a financial bind and need money fast, a merchant cash advance could be the solution. After submitting your application, you can receive the advance within one week, or even as soon as 48 hours. This is much faster than the several months it takes to get money through a bank loan. However, it's important to consider the potential drawbacks of this type of loan before taking out a debit card payday loans or using your credit card.

Cash advances aren't as bad as payday loans when it comes to interest rates, but that doesn't mean they're a good option. Companies with less-than-perfect credit often use cash advances to finance their activities, and these advances are usually paid with future credit card receipts or a portion of the funds from sales in an online account. If you know you'll need a cash advance in the future, consider using a credit card that offers 3% cash advances, such as the Capital One Venture card, instead of one that charges 5%. Bank of America assigns different APRs to direct deposits and cash advances with checks, and a higher APR to banks' cash advances, including ATM transactions, over-the-counter withdrawals, overdraft protection and equivalents.

Make sure you have the necessary cash advance credit line available on your credit card and plan to pay off the cash advance as soon as possible. Merchant cash advances are loans received by companies or merchants from banks or alternative lenders. Because they are considered “short-term financing”, merchant cash advance providers are not subject to as many interest rate limits and regulations. Usually, these cash advances also include a commission, either a fixed rate or a percentage of the amount anticipated.

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