Considering a Costly Credit Card Cash Advance? Try These 5 Tricks First
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So, you need $1,000 to pay the rent or repay a loan, but you don't have it. What do you do? You might consider a credit card cash advance.
Of course, that can be expensive. CreditCards.com says the average cash advance fee is close to 5%, and the average interest rate is over 24% — 6% higher than for purchases.
If you pay back that $1,000 cash advance in two months, you’ll pay an extra $90, which amounts to an effective APR of 54%.
But there are some ways to get that money from your credit card company for much less. Sometimes you can even get close to a zero-cost cash advance, or just skip the cash advance altogether.
Here are five strategies for avoiding expensive credit card cash advance fees.
1. Use PayPal “My Cash” Cards
If you have a PayPal account connected to your bank account, you have a way to get a cheaper cash advance. Here's what you do if you need $1,000…
- Buy two PayPal My Cash cards with a credit card
- Have the cashier load each one with the maximum $500
- Load your PayPal account with these
- Move the money to your bank account
When the transfer is complete (usually in a day or two), you can spend it as you wish.
Each PayPal card carries a $3.95 fee, so you'll spend $7.90 instead of the $50 cash advance fee.
Use a credit card with no balance and make the purchase the day after your statement date — that way, you'll have a month plus the legal 21-day grace period to pay the card in full and avoid all interest charges.
Not every place lets you pay for these with a credit card, but the CVS stores in Florida near me allow it. PayPal's list of vendors for My Cash cards names over 60 different chains, so keep trying until one lets you pay using a credit card.
PayPal imposes a limit of $4,000 in reloads per month, and some reports say PayPal may suspend or close your account if you abuse the system.
2. Go Shopping With a Friend
A friend may not be willing or able to lend you $1,000, but he might let you pay for his new refrigerator or television with your credit card and then give you the cash.
To be fair, take 1% less to cover the points he would have received if he had paid with his own cash-back credit card.
By engineering a cash advance like this, you avoid the usual up-front fee and you get a lower interest rate.
If you pay with a credit card that has no balance, you'll have three to seven weeks (depending on where you are in your payment cycle) to pay yourself back without interest.
3. Use a Balance Transfer
If you're in the good habit of paying off your credit card balances each month, now might be the time to make an exception.
Rather than pay cash-advance fees and interest, transfer a big balance to a card that offers zero interest for a while, and use the money that would have paid off the card as your cash advance.
Even better, make it one with no transfer fee. Chase Slate has recently been offering 15 months of zero interest and no transfer fee.
4. Use a Credit Card to Pay
What do you need the cash advance for?
It will cost less to just pay with a card, and there are services that let you pay almost anything by credit card now. The fees they charge are almost always are less than cash advance fees, and you pay the lower purchase-based interest rate instead of the cash advance rate.
Here are some examples:
These companies charge you up to 2.9%.
The IRS lists companies authorized to process tax payments by credit card. You can use these services to pay your annual tax bill or quarterly payments if you have a business.
The cheapest option at the moment charges 1.89%.
Plastiq will process your property tax payment by credit card. It charges 2.5%.
You can also pay your tuition bill through Plastiq.
You can pay mortgage payments, car loans, student loans and even credit cards through ChargeSmart.
The charges vary, so check to see if they're lower than any other cash advance options you have.
5. Buy Pre-Paid Debit Cards
Retailers sometimes have debit gift cards on sale.
For example, OfficeMax recently offered $20 off the purchase of at least $300 in Visa gift cards. So two of their $200 cards, which normally cost $206.95 (there’s a $6.95 fee) would be $393.90. Do that three times and you have $1,200 in visa cards for $1,181.70 total.
There are a couple ways to convert these into cash.
If you have an Amex Bluebird or Serve card, there are tutorials online on how to load them with Visa and MasterCard gift cards. Once you've loaded them, you transfer the money to your bank account, getting your hands on your cash advance.
The other way is to go to friends who are willing to help you out by buying the debit cards. Explain that MasterCard and Visa gift cards can be spent anywhere MasterCard and Visa debit cards are accepted (almost everywhere).
If you don't find a sale, the usual $6.95 fee is about 3.5% of a $200 debit gift card, which may be less than a typical cash advance fee.
If you find one of the grocery stores that sell $500 debit gift cards you might get that down to less than 2%. Be sure you have a way to liquidate the cards (turn them into cash) before you buy them, though.
Is It Worth the Trouble?
If you pay it back in a month, a $2,000 cash advance will typically cost 5% upfront ($100) and 2% interest for the month ($42 on the total balance of $2,100). That's a total cost of $142, and some of the strategies above may only cut that cost in half. So is it worth it?
You can decide that based on your own situation.
If you can't pay back that cash advance quickly, these strategies become more valuable. You'll typically be paying an interest rate that's 6% less than the normal cash advance rate. That saves you money every month.
Your Turn: What other tricks do you know for avoiding the fees and high interest of cash advances?
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Steve Gillman is the author of “101 Weird Ways to Make Money” and creator of EveryWayToMakeMoney.com. He's been a repo-man, walking stick carver, search engine evaluator, house flipper, tram driver, process server, mock juror, and roulette croupier, but of more than 100 ways he has made money, writing is his favorite (so far).