Cash advances allow cardholders to withdraw physical cash from compatible ATMs, usually at a portion of one’s credit limit. This is an exceptionally powerful feature, even in countries that have adopted digital payments, since paper bills remain in wide use for various situations. In the Philippines, search engines have logged a steady increase in the search term “how to cash advance in credit card” likely due to increased interest in this convenient feature.
However, this convenience does come with a literal cost as cash advances come with higher interest and finance fees. More importantly, these fees are applied the moment the amount is withdrawn from the ATM—not after the cardholder’s due date or grace period, as is typical with regular credit card transactions.
Still, when available, this feature can be a huge lifesaver given that cash remains king throughout much of the world. For instance, a lot of car and home repair specialists only accept cash, and a cash advance may help cover repair costs that can’t wait. Likewise, if you’re abroad or unable to access your bank account, cash advances may ensure you have cash in hand to manage urgent expenses.
In any case, if you do need to take out a cash advance, you have to be prepared to take on the resulting bills. Here are some tips to manage your credit card debt after withdrawing a cash advance:
1. Pay Off the Balance as Soon as Possible
As mentioned, most cash advances carry higher interest rates compared to regular credit card purchases and interest starts accruing immediately. If you let the balance roll over to the next period, you’ll find it increasingly difficult to avoid long-term debt. As soon as you take on a cash advance or any similar loan, repayments have to become a priority.
2. Stop Purchasing With the Card
After a cash advance, you’ll want to stop or slow down your card usage, as any increase in your total balance will make repayments even harder. In the meantime, switch to cash for most spending and use digital wallets or another credit card for essential non-cash purchases.
3. Rework Your Budget to Accommodate Extra Payments
Review your monthly budget and compare it against your actual expenses. From there, you can begin cutting back on non-essentials like restaurant food deliveries and paid entertainment so that you can allocate more funds towards faster repayment.
4. Enable Payment Notifications
Missing a due date can lead to penalties and higher interest rates, cash advance or no, making it even more difficult to pay off your loan. Be sure to enable email and SMS notifications from your provider so that you have some breathing room to get funds before your next due date.
5. Track Your Spending and Payment Schedules Closely
Keep track of your expenses so that you can avoid overspending while repaying your cash advance. Use budgeting apps or simple spreadsheets and update them daily so that you have a realistic idea of your progress.
6. Explore Other Options Before Turning to More Cash Advances
Taking on more cash advances is an especially risky move if you haven’t paid off your statement. Before you stick that card into an ATM, think if you have other options available to you. You might even already have an ATM or debit card that will do the job so there’s no need to accumulate more debt.
You should also think beyond cards and consider less risky options like borrowing from friends and family or selling off things that you no longer need. These alternatives may not always be easy but they’re often preferable to risking a never-ending debt spiral.
7. Use the Experience to Develop Healthier Personal Finances
Being confronted with unexpectedly high credit card debt is never a great feeling. Thankfully, you can use the experience to better inform your future financial decisions. For many credit card owners, seeing an unusually high statement was the wake-up call they needed to fix their finances and guarantee their permanent financial security. Use what you’ve learned in paying off your debt to explore better savings strategies, investments, and alternative financing options.
Use Cash Advances Responsibly
Though credit cards have been used in the Philippines for decades, it’s only recently that they’ve become more popular among middle-class consumers. Rising incomes, a shift to online shopping, and the proliferation of more targeted rewards credit cards have resulted in a huge increase in credit card ownership among Filipinos. This surge in credit card ownership has also led many to explore the many features of modern cards, including cash advances.
Unfortunately, not everyone is educated on the proper use and drawbacks of this powerful feature. If you or one of your loved ones has qualified for a credit card that permits cash advances, go back to these tips so you can manage the resulting debt more effectively. More importantly, build up your personal finances so that you can avoid situations where a cash advance is the only answer. At the end of the day, you must look at cash advances as something good to have but not something that you would ever want to use.
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