Did you know that there are 12 million people that use cash advances every year? If you’re like most people, you might use your credit card for a variety of purchases but there are other ways to cover your expenses without running up your credit card balance.

If you’re wondering, “what is a cash advance?” It’s a convenient method of borrowing money without having to worry too much about not having what you need in terms of finances. There is a lot more that goes into it which we’ll cover later on.

Cash advances offer a way to get the money you need when you’re in a bind or when you could benefit from a little extra cash earlier than you would get it from waiting around for payday. So what exactly is a cash advance, how does it work, and what are its benefits? In this article, we’re going to give you the answer.

What Is a Cash Advance?

So, what is a cash advance exactly? A cash advance is a process of borrowing money by using a credit card to immediately take out a loan. You can take out a cash advance from almost any credit card company, but be sure it’s something that you can afford to pay off at the end of the month.

Cash advances are intended to be short-term loans and to help with issues that arise suddenly. Credit card companies offer terms of 12 to 36 months so that you can pay them back the amount you borrowed plus interest.

In short, you can withdraw amounts of cash through an ATM or have funds directly deposited into your account through the lender. The way it works may fluctuate depending on the issuing company.

So, How Does a Cash Advance Work?

A way that a cash advance can work is by making a payment for the amount you want to borrow plus a fee. The credit card you have charged with the cash advance offers a variable rate of interest. This means it depends on what the banks are offering.

Your credit card company will then charge you interest for the money you’ve borrowed. While the average APR for advances will often equal about 24%, the rate can vary.

The interest rate on cash advances can be as much as 29% or as little as 5% or sometimes less. A good way to think of a cash advance is to think of it as using your card to purchase cash you need. Card of course means your credit card and in a way, you are buying the money you need in that moment.

Or, in better terms, the money you need is being advanced to you with the expectation of you paying it back. Also, for a cash advance, you shouldn’t think of it as a personal loan with long-term repayment options. Overall, an advance is more of a short-term solution.

This means that you should always try to pay your advance back in full or at least pay the minimum amount back if your agreement calls for that. Many advances are set up to be distributed when the cash is needed to cover you in a bind and then paid back on your next pay date cycle. This will always depend on the lender and what they offer because many companies will give you a repayment term as well.

Why Would You Need a Cash Advance?

You may need a cash advance when you are facing an unexpected expense such as a repair to your car or even medical bills. The costs of these needs are usually sudden, so it’s good to have the money in your account as soon as possible.

If you have a medical emergency, such as a broken limb or a serious illness, you may need a cash advance to pay for those expenses that you might not be able to cover right away.

Scenarios For a Cash Advance

The most common cause for needing a cash advance could be anything but overall, the main reason is simply when you need money but don’t have enough in your bank account. You can use a cash advance to pay for big expenditures such as a car repair, a medical bill, or a home repair. Let’s take a look at other scenarios where one would turn to get an advance.

• You don’t have enough money in your account to cover large expenses right away
• A credit card bill that is due
• Waiting for a paycheck to be deposited or a late invoice to be paid
• When you have an emergency that requires immediate funding

Keep in mind that a cash advance isn’t always used when you’re experiencing financial difficulty. Many people could use an advance on funds for multiple reasons. You might have the opportunity to take a last-minute trip and the money could make the chance of you going even more possible.

You might also want to buy a gift for someone but don’t want to wait until your next paycheck. A quick renovation over the weekend might be another good reason. The point is, that a cash advance is often meant to lighten the load and remove financial burdens that may arise unexpectedly or to give you breathing room in general. 

Let’s Talk About the Different Types of Advances

While cash advances have their advantages, there are a few different types you should be aware of. Knowing about each type could help you determine which options are best for your immediate needs.

Payday Loan Advance

Cash advances, also known as payday loans, are more of short-term loans and they are one of the most popular options. They are designed to help you out when you’re in a bind and need cash fast for emergencies or for other expenses that come up.

One of the best things about cash advance loans is that they’re sometimes easier to get. Depending on the amount and the lender, a credit check isn’t always going to be run which is a good way to protect your credit when you need a bit of money upfront. However, this is not always the case.

Hefty documentation is another thing you won’t have to worry too much about with a payday loan. You’re usually going to provide basic information but you will have to be mindful that many do come with interest rates and also charge an initial fee for you to access the funds. With a payday loan, the amount you owe will usually be auto deducted to satisfy the bill on your repayment date.

What’s great about this type is that it’s one of the best loan options and these types of companies often already know and have the idea that the money’s needed immediately. If you’re wondering how much money you might be able to borrow with this type of loan, then the answer will vary from company to company.

However, it could be anywhere from $100 up to $1,000 and some offer up to $1500 or more. A great example of a lender that works to get consumers what they need and fast is Rapid Cash.

When you need fast cash, advances of up to $4,000 are offered. The best thing is, that the process is broken into three simple steps and you can apply any time online.

Credit Card Advance

If you have credit cards that offer cash back rewards programs or that give you bonus points when you make purchases, then it might be possible for you to get cash advances on these cards without having to pay interest or finance charges. It’s really based on how much money is available in your account and whether or not the credit card company will allow it.

The entire stance on interest rates will also apply to the lender as well. Other things go into this as well such as having an account attached to the lender’s platform and then setting it up for auto pay.

Also, the account you’re connecting to and the health of the account will play a large part in how much of an advance you’re eligible for. Debit cards can also be for advances but you’ll need to check with your bank about whether they allow this type of transaction because sometimes banks won’t allow it altogether. Some examples of this are Suntrust and Citibank which are two institutions that don’t allow cash advances at all when using a debit card. 

Merchant Cash Advances

These are often referred to as business cash advances or commercial cash advances. You could be a small business owner who is looking for a way to get some quick help with your expenses. Or you could be an online seller who needs some help paying the bills until your next sale comes in.

Either way, you might be a good candidate for a merchant cash advance.  Merchant cash advances are solely designed for businesses. Business entities will often experience seasonal sales and fluctuating income levels.

This is one reason why merchant cash advances are so popular. They allow you to take out quick cash with a lot less of the usual requirements. Also, time constraints aren’t usually an issue either with a merchant cash advance.

These types of loans can provide the extra capital you need to keep up with your expenses, especially if you’re operating on a tight budget and not making enough money right away to sustain your operations in between projects. This could also be a good option if you don’t want to take money out of your operations budget to cover other things as they pop up.

What to Look for in a Cash Advance Provider

The first thing to do is to find a cash advance company that will give you the lowest interest rate. Always ask for these rates when applying for a cash loan because this could help you determine what offer is worth your effort and what you can afford. Comparing the different offers you get is another good tactic.

You should always ask about the repayment schedules they offer as well. This is pretty standard but many companies will customize this at times.

Overall, what will make a good lender depends on what you need. You should consider what you need, what you can afford, the time you need in between payments, and how fast you can get the funding.

How to Get the Most Out of Using a Cash Advance

Sometimes needing an advance is unavoidable but there are things you can do to borrow responsibly and get the most out of an instant cash advance.

Be Realistic About What You Take

Start by being realistic about what you can pay back. Having the cash you need to pay for an expense is a great feeling but it would be an even better feeling if you’re confident in the repayment terms and interest rates. Also, try not to take out more than one at a time.

Pay More Than the Minimum

Paying the minimum is good, but paying more is better. Paying more than the minimum will help you to pay off the cash loan faster. The faster you pay off what you owe, the less interest you will need to pay as well.

If You Can Pay It off Early, Do It

Paying things off early can mean that you don’t have to worry about the initial repayment term any longer. This is another way to keep yourself from having to pay more on interest because you won’t be stretching out the payments.

However, while paying off your advance early can be a good thing, you still want to check with your lender to see if they have any penalties for prepayments. If they do, ask more about it and determine which route would allow you to save the most money.

Getting Rapid Cash Without the Hassle

Getting cash fast can often seem out of reach, but when you work with Rapid Cash, it isn’t. If you were asking, “what is a cash advance?”, now you know a bit more about what it is, how it works, and your different options.

With 24/7 online access to apply for funds, four in-store locations, or the option to give us a call while we do the application for you, getting what you need has never been easier. Connect with us today to get started and see how much cash you can get in just minutes.