Credit Card Cash Advance

[Stinger]

Hey mates,
I have never really had an issue with debt, or had any reason to borrow money so cash advances never became an issue, however I have now found myself in a situation in which I need to borrow a large amount of cash to pay off a debt before December - unfortunately the money to cover the full amount won`t be available until the middle of December.

As such I am looking into a cash advance from my credit card - As I have never missed a payment or had any situation to be charged interest I am sitting at 18.5% still.

I am however a little confused about how cash advances work. Looking at borrowing from a CIBC Platinum which has has interest from the date they are taken.

I don`t quite understand how this works, does this mean I am charge interest daily or is there a set time to repay the the advance before the interest comes into effect starting from day 1..

Any help would be much appreciated on how it all breaks down.

[CCCC3333]

If you get a cash advance, then interest will start accruing immediately.

[Stinger]

That I understand, however from there I just get confused.

If I was to borrow $1000, with $20% interest and pay it back in 10 days,

Would I be charged 20% per day, or just 20% period, or 6.6% because I paid it off within 1é3 of 30 days hence only charged 1é3 interest....

If this is the normal way interest is charged forgive me, never been charged interest a day in my life on any debt :o so I have no idea.

[tng11]

That I understand, however from there I just get confused.

If I was to borrow $1000, with $20% interest and pay it back in 10 days,

Would I be charged 20% per day, or just 20% period, or 6.6% because I paid it off within 1é3 of 30 days hence only charged 1é3 interest....

If this is the normal way interest is charged forgive me, never been charged interest a day in my life on any debt :o so I have no idea.

20% per year, with interest calculated daily from your cash advance and compounded, that's what it says in most card agreemtns.

Be forewarned, all banks will tack on a $ fee (can be $1-$3) per transaction and a cash advance fee right off the bat (is it 1 or 2%?)

[leeo]

I'm a little confused by this as well does this mean a $1000 cash advance will cost him $202 for 10 days?

[SeeYouNextTime]

If it is $1000 for 10 days at 20% interest, it is:

$1000 x .20 / 365 x 10 = $5.48 in interest for the 10 days.

My advice, get a Canadian tire mastercard. Their interest rate is 5.99% for cash advance.

[Barayolayosa]

If it is $1000 for 10 days at 20% interest, it is:

$1000 x .20 / 365 x 10 = $5.48 in interest for the 10 days.

My advice, get a Canadian tire mastercard. Their interest rate is 5.99% for cash advance.

Close, but this formula ignores compounding interest... I believe the proper calculation would be:

1000*(1+0.2/365)^10

Of course, this makes very little difference on $1000 for 10 days, but it may be material depending on how much OP is looking to borrow and for how long.

[gman]

In addition, do not use this credit card to do purchase for a month because they will charge interest for the whole balance including new purchase.

[dog_mumu]

Close, but this formula ignores compounding interest... I believe the proper calculation would be:

1000*(1+0.2/365)^10

Of course, this makes very little difference on $1000 for 10 days, but it may be material depending on how much OP is looking to borrow and for how long.

Credit cards do not compound interest. You are required to pay interest off every month, it is calculated daily but they all state in terms and conditions that they never charge interest on interest, i.e. no compounding.

[dog_mumu]

In addition, do not use this credit card to do purchase for a month because they will charge interest for the whole balance including new purchase.

Actually this is not always true. As long as you pay off the full balance by the due date interest will only be charged on the amount of cash advance, not on purchases. So if OP carries no balance at the beginning of December, and then pays off all of cash advance amount and all purchases before the January due date, only the cash advance portion will be accumulating the interest.

[Barayolayosa]

Credit cards do not compound interest. You are required to pay interest off every month, it is calculated daily but they all state in terms and conditions that they never charge interest on interest, i.e. no compounding.

I had no idea! I stand corrected!

[Stinger]

Thats for the clarification guys - Much appreciated :)

As for suggestions on alternatives, it would have been a good idea had I had the chance to prepare for it, unfortunately this was rather unexpected, and the Canadian Tire card wouldn't give me the credit amount needed for this "loan"

As it turns out, its only going to be until next week, so the intrest isn't going to kill anyone even with the amount.

[Jacklad]

Be forewarned, all banks will tack on a $ fee (can be $1-$3) per transaction and a cash advance fee right off the bat (is it 1 or 2%?)

I haven't been charged any transaction fees (if I use the CC at the associated institute's machine), and I've never had a percentage cash advance fee added, either.

That said, I haven't taken a cash advance in years so things may have changed. :D

[angel_wing0]

the the 0% interest for 15 months mbna cc :)

[gman]

Be forewarned, all banks will tack on a $ fee (can be $1-$3) per transaction


Not true. Not all bank does that.


and a cash advance fee right off the bat (is it 1 or 2%?)

Not true. Not all bank does that.

I 'borrow' low interest rate money from CC (less than prime rate and may even be 0%) enough. I was never charged transaction fee or cash advance fee.

[at1212b]

Isn't it also contingent on if the balance shows up from the previous month, so OP borrows money, but pays it off right away with no balance on any statement therefore no interest charged? Or maybe money advances are different as 'cash is king'

On another note, I had to do the same, so what I did was I just walked into a Bank branch (BMO) showed my credit with ID, and just got cash directly from the teller. I did pay a little interest as I expected that to be the cost of borrowing but didn't pay attention to it.

[Anonymouse]

I accidentally paid my TD Visa twice, so I did a transfer between the card and my chequing account to make the balance zero. Ended up paying interest on the money I "borrowed". Banksters, sigh.