The utility value of credit cards is not restricted to making purchases alone. Over the last decade or so, this mobile credit instrument has been redefining the way to we transact to fulfill needs that have a financial value attached to them. Some of the different types of transactions once can make using a credit cards have been listed below for reference.
- Purchase goods/services
- Pay utility bills
- Transact online, over the internet
- Buy now and pay in Equated Monthly Installments
- Make Cash Advances
The most alluring feature about credit cards is that it lets us make Cash Advances, i,e withdraw cash from an ATM or other dispensing options such as over-the-counter at designated branches. This benefit helps immensely, specially in case of emergency situations or times when we do not any others way to pay for the requirement. While this feature continues to be a boon, it has the potential to hamper your credit if not used wisely. Let us understand how it works and look at some of the Do’s and Don'ts you must be bear in mind while using this option available on most of the credit cards offered in the Philippines.
How Does Cash Advance Work?
When you sign up for a credit card, a portion of the overall credit limit is available for making cash advances. Let's say you have a platinum credit card with a revolving limit of P120,000 that is primarily available for making non-cash advance transactions(purchases), about P40,000 will be the cash limit assigned. The card member can use his card to withdraw cash up to this limit. Remember, this limit is not exclusive and a component of the overall limit. Cash advances come with a one time withdrawal fee of a fixed amount and also interest charges at an exclusive rate. The interest rate is slightly above the one fixed for purchases.
When you make a payment, most of the banks apply payment of the cash component first(assuming you have make a cash advance) followed by purchases and other types of charges. This payment allocation procedure will be available in the T & C document supplied along with the card in the welcome kit. It may also be provided in the monthly statement as a fine print. The details will also be provided on the relevant webpage of the bank.
Cash Advance- Do’s
- Get yourself acquainted with the terms of making a cash advance such as knowing the limit, the interest rates, fees for making withdrawals and so on. This move helps immensely in not only understanding you card, but also helps in limiting and monitoring transactions in this category.
- Do make it a point to sparsely use this option only when you need the most. Always rely upon liquid options such as cash since it will still be the bank’s money you will be using.
- Monitor your transactions in this category and ensure they are paid off in full(if possible) each month so that you’re not burdened with heavy interest charges.
- Do ensure this option is used only during emergencies and situations where you do not have cash. Continuous usage may trap you into debt.
Cash Advance- Dont’s
- In case you’ve made a cash withdrawal, do not just make the min. payment due. As stated earlier in this article, payments are applied on certain principles and the little payment you make may not cover the entire value. Spend some time to understand the transactions in this category and make an attempt to pay off the entire amount so that you do not incur additional charges in the next billing cycle.
- Do not make it a habit of using the cash option from your credit card for routine transactions. Instead, consider alternatives. It may have an impact on your overall credit since it is considered negative to have a large outstanding cash balance on the card.
Alternatives such as the EMI option to pay for large value articles/services is something you can explore which not only ensure you procure goods of your choice but also saves loads of interest charges. Some of them may even offer 0% interest when you convert large value transactions into EMI for a certain term.
If you landed on this page looking for credit cards that comes with relatively high cash limits, use the credit cards section on this homepage to compare cards from various banks and choose your card wisely. One can also look up for cards category wise.