Can people become addicted to taking out cash advance loans?
Like many things in life that offer quick rewards with seemingly little effort, cash advancing can too be addictive. You see something you want to buy or need a little extra cash for something that can’t be paid by credit or check and with a few simple actions at the nearest ATM you are suddenly a few hundred dollars richer.
The lure of seeing instant cold hard cash in one’s hand is enough to send many people straight to an ATM to get a cash advance from their credit card, which of course the credit card company is more then happy to help out with. Some people may even think that by getting cash advances they can convince themselves that they are now buying something expensive with cash rather then with a high interest credit card.
Of course most people addicted to something do not see the downsides to their addictive activities until the realities of the situation they wind up in are presented to them up close and personal. In the case of cash advancing, this reality may hit when the next statement comes in and that 200 dollars in quick cash is going to cost over 20 dollars more then the initial advance. Most credit card companies charge 20% and up on cash advances plus potential fees. The person most likely to go for a cash advance either does not have the cash up front or is impulsive and wants the cash now. The credit card companies know this so they dangle the quick and easy cash advances in front of these vulnerable individuals and begin making money off of them easily.
For some individuals a cash advance can be a great thing in an emergency and if paid off in full at the time of the first billing statement, the person may only pay a small service fee and avoid the interest rates. On the flip side as you already know, the person that impulsively went for the cash advance is suddenly faced with paying that cash advance or just paying the minimum on their credit card. Many choose the latter and end up racking up huge amounts of debt from their cash advances and in addition to any debt they already have on the credit card.
So yes, cash advances can be addictive and can support impulsive shoppers and those who like the feeling of having sudden cash in their hands. A final word of advice; if you haven’t yet done a cash advance but think that your great introductory interest rate on your new card includes cash advances, think again. Credit card companies set the interest of cash advances and cash advance limits separately from the card’s credit limit and interest rate on credit purchases. That means you could have an intro rate of 0% for 12 months, yet have a cash advance rate of 20% or more. If you are already addicted, make it a priority to pay off your cash advances now.