Cash Advances: How They Work and How They Can Help

Let’s face it: not having cash on hand can be frustrating. Credit card bills, car payments, and rent schedules don’t always line up with our paycheques, leaving us strapped for cash at the last minute. We’ve all been there!

 

Add in the last-minute expenses like having to replace the brakes in your car, purchasing a new water heater, or—knock on wood—accidentally dropping your phone in the toilet, and you could easily find yourself in a bind.

 

Saving for emergencies is not as easy as it sounds. In fact, only 25 percent of Canadians have money set aside in a rainy day fund. When an emergency hits and your wallet is light, cash advances are a great way to get access to the funds you need,—especially if you need it quickly.

 

But what is a cash advance and how does it work? In the sections below, we’ll dive into all of the details of cash advances to help you make the best choice for you—and your wallet.

 

What is a Cash Advance and How Does it Work?

 

A cash advance is a short-term loan that has one sole purpose: to get you your money as quickly as possible. Short and sweet, right? Well, there are actually a few subtle differences in how you can get a cash advance (and how this type of loan works). There are two ways that you can get a cash advance:

Get a cash advance through your credit card

These days, most credit cards offer a cash advance option. This lets you borrow against your available credit to get access to funds quickly. If your credit card has a pin attached to it, you can simply go to an ATM and withdraw cash, just like you would with a debit card. If not, you’ll need to find a bank that offers cash advances through your network (Visa, Mastercard, Discover, or American Express).

 

Using a credit card for a cash advance can be a quick fix to an empty bank account, but there are a few disadvantages to consider before you start opening your wallet:

  • Interest rates
    Credit cards are notorious for high interest rates, and cash advances are no exception. The average credit card APR can be as high as 25 percent, and many cards tack on higher fees for cash advances.

    Of course, if you have high credit scores, your overall APR will likely be lower—but using a credit card for a cash advance isn’t exactly saving you money. While regular purchases don’t start accruing interest until your billing cycle ends, cash advances will start accruing interest immediately. Without a grace period, you’ll have to be prepared to start repaying that loan right away.

  • Extra fees
    Along with high interest rates, you’ll also need to pay a few fees. Every credit card has its own rules and regulations, so there are a couple of different ways you might see fees show up on your monthly bill.
  • Low withdrawal limits
    Even if you have thousands of dollars in available credit (yes, we’re dreaming of that day too), keep in mind that you won’t be able to take out the entirety of your spending limit. Most credit cards limit cash advances to a few hundred dollars—so if you need to cover more than the cost of a good steak dinner, you could be out of luck.

 

If you only need a couple hundred dollars—and you’re willing to put up with the extra fees and higher interest rates—using a credit card for a cash advance could be a good solution.

 

But what can you do if you don’t have a credit card, or if you’ve already maxed out your line of credit? And what if you need more than what your credit card will let you borrow? Luckily, there is a second option: payday lenders.

Get a cash advance through a payday lender

Payday lenders offer short-term loans that are borrowed against your next paycheque. In this scenario, your cash advance will need to be repaid when your next paycheque comes in (although some lenders will allow for longer-term loans). Similar to a credit card, taking out a cash advance with a payday lender lets you get money quick, bypassing the long wait times from traditional lenders, like banks or credit unions.

 

So what’s the difference between getting a cash advance from a payday lender instead of using your line of credit? Here are a few key reasons why using a payday lender might be a better option for you:

  • Online access
    Most payday lenders offer a completely online process. You can fill out an application and get approved on the same day, all while sitting in a coffee shop, waiting for an Uber, or even binge-watching your favorite show. Plus, being able to apply for cash advance loans online means you don’t have to deal with standing in line in a bank or at an ATM—or even worse, scheduling an appointment to speak with a lending officer.
  • 24/7 application and approval
    You can’t predict when you’ll need a quick influx of cash—it could happen at two o’clock in the afternoon or two o’clock in the afternoon. No matter what time of day or night (here’s looking at you, night owls), a cash advance loan through an online lender makes it easy to get the funds you need.

    The best short term loans in Canada will provide instant e-transfers to deliver funds. This means your money is immediately deposited into your account after approval, taking away the stress of constantly refreshing your banking app, wondering when your money will be available.

  • Larger borrowing limits
    Getting a cash advance through a payday lender means having access to larger loan amounts. Payday loans in Canada range from $100 to as much as $1,500, making it easier to cover larger expenses—like when you get a flat tire, or need help covering the rent.

 

If you have a steady, reliable source of income and can pay back your loan in a short period of time, getting a cash advance through a payday lender is a great option. This process lets you get cash fast without jumping through hoops—which is the last thing you’ll want to do when you’re strapped for cash!

Everything You Need to Know about Credit Card Cash Advances

Credit card cash advances are amounts of money which people are permitted to “borrow” from their credit card companies. These advances are generally processed via ATM withdrawals or deposited checks. Unlike other types of loans, credit card cash advances almost always come along with hefty interest rates, usually notably higher than the interest rate of the associated credit card. Furthermore, the interest tied to credit card cash advances generally begins on the day one borrows the funds.

There are a variety of reasons why an individual may consider taking out a credit card cash advances. In most scenarios, doing so is ill-advised, but regardless of the decision which one ultimately makes, having an awareness of the following information is paramount.

There are Many Strings Attached

One of the massive pitfalls of credit card cash advances is the plethora of attached strings. As previously stated, credit card cash advances generally come along with sky-high and immediate interest rates. ATM fees are also part of the deal, as are payment allocation rules. Of course, certain logistics will vary depending upon the bank/credit union and their rules regarding credit card cash advances.

At the end of the day, credit card cash advances are not truly worth it. The amount of money will which be paid in combined interest and fees will undoubtedly surpass the amount of originally borrowed funds. In essence, someone who takes out a $500 cash advance may wind up paying $1000 (or more!) by the time they’ve covered all of the subsequent monetary charges.

You Could Have Deeper Financial Issues

In light of the multiple expenses associated with credit card cash advances, resorting to taking one out could be indicative of deeper financial issues. In most cases, individuals who take out cash advances do so because they need cash, yet have no other way of getting it. Even in today’s world, there are still certain situations where merchants may not accept credit or debit cards as payments. Unfortunately, there are other people who resort to cash advances for unwise purposes, such as gambling.

How to Steer Clear of Credit Card Cash Advances

It goes without saying that the pitfalls of credit card cash advances vastly outweigh the upsides. For this reason, people should employ the proper financial strategies so they are never completely unable to access cash if they truly need it. Thankfully, there are several ways of going about this. The first and most obvious strategy involves saving money. The amount of money which can be saved will greatly depend upon the amount of one’s income and their expenses. Ideally, the former should always outweigh the latter. This, in turn, allows for people to gradually build an emergency fund to be used in times of need.

If someone’s expenses outweigh their income, then the person has a few options: increase income, decrease expenses, or both. Income can be increased by seeking a raise, requesting additional working hours, or pursuing economic ventures outside of one’s day job (such as freelance work). Decreasing expenses is viable by simply reducing the money which is being spent. Most people do this by going out less often, canceling monthly subscriptions, and shopping with coupons. This may not seem glamorous, but it certainly beats having to take out a credit card cash advance due to a lack of funds.

Finally, the best way to avoid credit card cash advances is by always having some cash on hand. This could mean storing a few hundred dollars in a safe or keeping some bills in a wallet. Regardless of the financial means one takes to save money and maintain readily available cash, just about anything is better than taking out a credit card cash advance.

 

Authored by Gabrielle Renee Seunagal

Things to Know Before Getting Your First Credit Card

There are many upsides to having a credit card, such as building one’s credit score, making certain purchases, and even earning cashback points. With the right practices and money management habits, people can do quite well and set themselves up for financial success. However, without the proper knowledge, individuals who manage to obtain credit cards can wreak serious damage upon their financial standing and sink themselves into debt for years or decades to come. For these reasons and more, an awareness of the following facts, prior to getting one’s hands on a credit card, is absolutely paramount.

The Charges Must Be Paid Back

Most people are very young (18-22 years old) when they receive credit cards within their own names. While individuals in the foregoing age range are, in fact, adults, they may not necessarily have the knowledge of everything which comes along with credit card ownership. Virtually everyone has heard horror stories of someone swiping their card repeatedly and then being unable to pay the monthly bill. An inability to pay the bill when it comes due results in subsequent interest charges.

Interest is a hole which can take years, decades, or even a lifetime to climb out of. For this reason, starting off with a low credit limit (no more than $500) is usually best. However, regardless of the credit limit, people must be sure to pay back the money which they “borrowed.” It’s worth noting that certain credit card plans provide grace periods before charging interest on unpaid balances. Not all credit cards plan do this and, to be on the safe side, anyone who charges a credit card should be sure to make the appropriate payments before or when the bill comes due.

Building Good Credit Takes Time and Discipline

Merely having a credit card and paying off the balance will not immediately engender good credit. Time and consistency are considerable factors in the development of good credit; people who are truly serious must ongoingly pay off their charges and abstain from incurring any interest. Moreover, credit card users are advised not to spend more than 30% of their credit line. There are no penalties for surpassing the 30% threshold, but adhering to it truly helps one establish their credit and finances.

Credit Cards are Not For Everyone

Despite the upsides of credit card ownership, they are only applicable when people punctually pay off their balances and avoid debt. Individuals who struggle with money management skills or suffer from low income might do well to hold off on obtaining a credit card. Credit should only be used by people who know they can afford to pay back what they’ve charged. Credit cards are not free money; at some point, the bill always comes due.

 

Authored by Gabrielle Renee Seunagal

Things to Know Before Taking Out Student Loans

As the amount of student loan debt surges with each passing day, more and more people are beginning to question whether or not borrowing money from the government for the sake of attending college is truly worth it. The economy and job market are changing; more and more young people are opting to find employment within the gig economy as freelancers and independent contractors. Others, however, are still deciding to take out student loans for the sake of pursuing a higher education.

Student Loans are Not Free Money

There are a shocking amount of young people who truly lack an understanding of the nature of student loans. Individuals who borrow money from the government will, in fact, have to pay it back. Usually, recipients of student loans will have to make monthly payments; although the specific dollar amount depends upon a variety of factors, with one of the main ones being how much money was borrowed in the first place. Countless young adults make the mistake of borrowing much more than they actually need.

People who are considering taking out loans should also be aware that they may not be able to pay them back very quickly. Months, years, or even decades can pass by before borrowers are truly debt-free. This can be quite daunting to the young, ambitious 22-year-old who wants to enter the workforce and make a name for themselves. Likewise, such high amounts of debt can ruin opportunities which would otherwise be available to individuals who do not owe thousands of dollars to the government.

There are Other Ways to Pay for College

Believe it or not, taking out student loans is not the only way for young people to fund their college careers. Academic scholarships, military service, university employment, and even working for certain companies are potential avenues for covering the costs of university. Granted, the aforementioned alternatives generally come with certain stipulations, although many people would argue that the stipulations are better than the crippling debt which often accompanies student loans.

Furthermore, students who maintain good grades throughout their time in high school are likelier to have more opportunities for academic scholarships. Parents should encourage their children to do well during their high school careers so that they have options for college which extend beyond taking out student loans.

College is Not for Everyone

While many people attend college and go on to live comfortable, middle-class lives, college is definitely not for everyone. One of the gravest mistakes in today’s education system is failing to educate students about all the options which are available to them after high school. So often, young people are automatically indoctrinated into believing that attending university is their only choice.

Another common malpractice is telling students that they will be statistically poorer than individuals who choose to go to college. Considering the variety of options which exist post-high school (such as freelancing, trade school, independent contract work, entrepreneurship, etc), educators who fail to inform students of the other paths they can take besides college are doing students a disservice.

A Final Word

At the end of the day, each individual has to decide whether or not borrowing student loans is the best choice for them. Sometimes it works out well, but other times it doesn’t. Regardless of the decision which someone ultimately makes, there is never any harm in having complete information and an awareness of the alternatives and potential consequences.

 

Authored by Gabrielle Renee Seunagal

What is a Debt Collection?

It goes without saying that financial lenders expect to get their money back. The borrower (i.e. the individual in debt), however, may not always be able to pay back funds which were loaned to them. After a certain amount of time passes, financial lenders may decide to contact a debt collection agency, also referred to as debt collectors.

An Overview

Debt collectors are simply members of companies who are tasked with the responsibility of collecting unpaid debts. Collectors must also adhere to certain rules and guidelines as they work to make borrowers pay up. First and foremost, collectors cannot contact people before 8AM or after 9PM. They are also prohibited from making back-to-back calls and, in certain cases, debt collectors cannot call borrowers at their places of employment. However, members of debt collection agencies are allowed to send texts, emails, letters, and, of course, make calls, so long as they remain in accordance with the aforementioned stipulations.

How to Handle Debt Collectors

There are a variety of ways people can go about managing debt collectors. Indebted individuals can either pay off the debt or ignore the debt collectors altogether. Obviously, the former option is more advisable than the latter, however, there are many people who simply don’t respond to collectors in the hopes of them eventually going away.

More often than not, setting up a payment plan with the collections agency is the best route to go. Ignoring debt collectors is extremely risky, seeing as they can initiate lawsuits which can subsequently lead to wage garnishments. Most collectors are more interested in getting individuals to pay up than they are in going through legal battles. Even so, those who willfully ignore debt collectors are doing so at their own risk.

Do Debt Collections Impact Credit?

It goes without saying that debt collections are absolutely terrible for any person’s credit. Collections can prompt extreme declines in one’s credit score; the individual may also be subsequently denied for loans or credit cards in the future. Some people may believe that they can counteract the damage with certain practices, but this is more difficult than most realize. A debt collections account can remain on an individual’s credit report for as long as seven years. The only true way to reduce the damage is by paying off the debt. With time, and other wise financial habits, the damage will eventually subside.

How to Avoid Debt Collections

The surest and most effective way to avoid debt collections is by not going into debt. This is quite simple, yet still remains a feat that countless people struggle with. Having a budget, saving money, and living within one’s own means are some of the best ways to steer clear of debt. People are furthermore advised to stay away from loans, if at all possible, and not swipe their credit card unless they know they’ll be able to pay off the balance when the time comes.

 

Authored by Gabrielle Renee Seunagal