Cash Advance
A cash advance refers to the act of a cardholder using a credit card to withdraw cash from a bank or an automated teller machine. Cash advances typically incur higher interest rates and fees, and the withdrawn amount is immediately added to the credit card's outstanding balance.
Cash Advance
Definition: A cash advance refers to the act of withdrawing cash from a bank or an ATM using a credit card. Cash advances typically incur higher interest rates and fees, and the withdrawn amount is immediately added to the credit card's outstanding balance.
Origin:
The concept of cash advances originated with the widespread use of credit cards. As credit cards became popular in the mid-20th century, banks began offering cash advance services to provide cardholders with access to cash in emergencies. The earliest cash advance services can be traced back to the 1960s.
Categories and Characteristics:
Cash advances are mainly divided into two categories: bank counter advances and ATM advances. Bank counter advances require the cardholder to visit the bank in person, while ATM advances can be made at any ATM that supports credit card withdrawals. Both types share the common characteristics of high interest rates and fees, and the withdrawn amount is immediately added to the credit card's outstanding balance.
Specific Cases:
Case 1: Xiao Ming encountered an emergency during his trip and needed cash to pay for medical expenses. He used his credit card to withdraw $500 from a local ATM. Due to the cash advance, Xiao Ming had to pay a 3% fee ($15) and a daily interest rate of 0.05%.
Case 2: Xiao Hong realized she forgot to bring cash while shopping, so she went to the bank counter to get a cash advance of 2000 RMB using her credit card. The bank charged a 2% fee (40 RMB) and a monthly interest rate of 1.5%.
Common Questions:
1. How are the interest and fees for cash advances calculated?
Interest and fees are usually calculated based on the bank's policies. Fees are generally 2%-5% of the withdrawn amount, and interest is calculated daily or monthly.
2. Do cash advances affect credit scores?
Frequent use of cash advances may be seen as a sign of poor financial health and could negatively impact credit scores.
