Cash Advance On A Credit Card – Specific Question?
Attention all accountants and bank people:
My father just wrote me a $1500 check today. I took it to the bank thinking I would be able to get $500 cash and deposit the rest. Unfortunately, it was from a different bank than mine, and they would only offer me $100 cash from the check. They said the rest would be available at midnight for withdrawal. Well guess what? I just checked the balance (it’s like 2:45 am) and the funds have not posted (damn teller!) Anyway, I need an additional $350 in cash by tomorrow morning.
My question is this: on one of my credit cards I have a $500 cash advance limit. If I take that card to an ATM and take out $350, what would be my total finance charge if I were to pay it back next Tuesday or Wednesday. I think that the interest is compounded daily (!!!!!) and the daily periodic rate is .06642% and the APR for cash advances is 24.24%. If the finance charge won’t be too much then I will probably just do that in the morning. Thanks!
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The exact numbers should be in your credit card’s terms and conditions. Usually cash advance fees are 3% of the amount with $5 minimum and no maximum. I don’t know if there’s another charge for using an ATM, but I don’t think there is.
There is usually no grace period for cash advances, so you will pay daily interest every day until the balance is paid off. $350*.06642%=$0.23247. Since it’s compounded daily it will become a little bit larger every day, but you won’t notice in just one week.
IF you have a $0 balance on your card before you take the cash advance and do not use the card at all until you pay off the cash advance, your charge will be approximately $350*3%+$350*.06642%*number of days. For 10 days it’ll be ~ $12.82. Remember that there is a difference between you paying your card and the payment actually being processed by the credit card company (unless you can visit the branch and they are able to post your payment immediately).
IF, HOWEVER, the balance on your credit card is not $0, your payment will be applied towards the balances with lower APRs first. Usually APR is lowest for purchases, higher for balance transfers, highest for cash advances. This is the most common method and it’s explained in terms and conditions of every credit card. You will have to pay off the entire balance on your card if you want to stop accruing interest charges for the cash advance.
The mumbo jumbo from other answerers regarding the minimum finance charge is incorrect. The amount calculated above ($12.82) is a finance charge. The “minimum finance charge” comes into play if your total finance charge on the credit card’s MONTHLY STATEMENT is lower than the card’s “minimum finance charge.” In that case you’ll pay the “minimum finance charge” (which is usually $0.50-$1.00) instead of the calculated one.
What you should have done is gone to your father’s bank and cashed the money. Might be better if he went with you. The teller at your bank was wrong — it is at the bank’s discretion to credit your account immediately or later. There is a difference between “available balance” and “ledger balance”, and generally ATM deposits result in $100 courtesy addition to the “available balance” until the check clears, while deposits in person can clear the entire amount, but it depends on your bank and your relationship with the bank.
Good luck.
Most credit card company’s give you a 30 day grace period which means if you pay the balance within the next billing cycle yo don’t get charged any interest. But they also usually charge a 3-5% fee for cash advances. So if you take out $350 at the 5% fee you would have to pay back roughly $368 which is the original $350 + $18 fee.
You will be charged the minimum finance charge. Check with the credit card company for specific rate.
Minimum finance charge
Some credit cards have a minimum finance charge. You’ll be charged that minimum even if the calculated amount of your finance charge is less. For example, your finance charge may be calculated to be 35¢–but if the company’s minimum finance charge is $1.00, you’ll pay $1.00. A minimum finance charge usually applies only when you must pay a finance charge–that is, when you carry over a balance from one billing cycle to the next.
Cash advance fee – Charged when you use the card for a cash advance; may be a flat fee (for example, $3.00) or a percentage of the cash advance (for example, 3%)
Ok, the finance charge would be approximately $350 X 2% or $7.00 IF you kept it for a whole month (30 days).
If you repay it in a week (about a fourth of the time, it will cost you about $1.75.
However, there is often a ‘cash advance fee’ and that is generally more costly. The fee varies by bank, amount and ATM.
Typical percentages run 3% or $10.50, but check to be sure.
I don’t think that there is a daily rate, I think that if you pay it off before the cycle is over then you should be okay. Your best bet is to simply call your credit card company and get the correct answer to your question. That way you will know for sure if you ever need to do this again in the future!! Good Luck!