When you urgently need money to repair your car, sort out a medical emergency, or buy a gift for a loved one, there are many financing options to consider. One of the most accessible ones is the cash advance on your credit card.
A cash advance is a small loan you borrow from your credit account to help you sort out a financial crisis. Although they are helpful, you must understand the potential impact they can have on your credit score and finances before choosing to go this route.
So, how does taking a cash advance against your credit card to hurt your credit score? This article explains all.
How Does A Cash Advance Affect Your Credit?
Cash advances are among the best financial boosters to rely on to get quick cash. They are lifesavers if you are looking for bad credit loans Quebec services when other options are not at your disposal.
Contrary to what many people believe, cash advances won’t affect your credit score. It won’t even appear in your credit history if you take one.
But there are still ways these loans can have an impact on your life and borrowing history. Here are things you must watch out for when taking cash advances.
There Is No Grace Period
When purchasing credit cards, you are likely to get a grace period of 21 days before your interests are charged. This gives you an easy time to repay before borrowing another credit.
So sad for a cash advance, there is no grace period guaranteed even if you stay longer with the credit.
For instance, when you apply for a cash advance, you are being charged interest just from the day you borrowed the advance.
Whatever period you repay your advance, you’ll still be paying some interest recurred during the first advance application.
With other loans, the faster you pay the loan, the better chance you have to secure another. This is too bad for a cash advance as it won’t be possible.
Watch Out For Your Credit Utilization Ratio
You’re already aware that you must have a positive credit history to stand a good chance of securing a loan. Well, thousands of financial institutions make it a primary factor.
Therefore, you need to maintain an excellent credit utilization ratio to your overall credit score. Mostly, a ratio of about 30% is good to go. A cash advance may push it too high if you’re not careful.
Won’t Affect Your Credit
Nothing is more frustrating than realizing that you have a poor credit score. This means that you can’t borrow money from big financial institutions. What if you only depend on your credit limit?
The good news is that cash advances are always flexible, and they won’t affect your credit score. They have no impact on your credit report because they don’t even appear in your borrowing history.
It also means they won’t lower or raise your credit score, which can be a problem on its own way.