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.
It’s quick money, yes. But it’ll cost you. The average cash advance fee is close to 5%, according to CreditCards.com. 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 ways to get that money for much less. Sometimes you can even get close to a zero-cost cash advance, or just skip the cash advance altogether.
5 Ways to Avoid a Credit Card Cash Advance
Here are five strategies for avoiding an expensive credit card cash advance.
1. Transfer the Balance to a Zero-Interest Credit Card
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.
2. Use a Credit Card to Pay
What do you need the cash advance for?
Odds are, 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:
- Rent: You can pay rent with a credit card through RentMoola or Place. They make arrangements with landlords or send a check. If you have roommates, you can even split rent and pay with two cards. These companies charge you up to 2.99% in service fees.
- Income Taxes: 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. As of August 2019, the cheapest option carries a 1.87% fee.
- Property Taxes: Plastiq will process your property tax payment by credit card. It charges 2.5%.
- Tuition: You can also pay your tuition bill through Plastiq.
3. Load Prepaid Debit Cards With Gift Card Balances
Retailers sometimes have debit gift cards on sale. For example, OfficeMax has 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 gift cards for $1,181.70 total.
You can then convert them into cash using prepaid debit cards. Load prepaid debit cards — like Amex Bluebird or Serve — with the money on your Visa or MasterCard gift cards. (Here’s a tutorial that explains how to do it at a Walmart MoneyCenter Express kiosk.) Once you’ve loaded them, you transfer the money to your bank account, getting your hands on your cash advance.
If you don’t find a sale, the usual $6.95 fee is about 3.5% of a $200 debit gift card, which is probably still less than a typical cash advance fee.
4. Get a Short-Term Loan From a Low-Income Credit Union
Like a credit card cash advance, a payday loan can be tempting when you’re in need of cash. But instead of making either of those costly moves — and opening yourself to the possibility of paying double- or triple-digit interest on your $1,000 loan — look into joining a low-income credit union.
These credit unions receive federal low-income designations when the majority of their members earn less than 80% of the median income for their metropolitan area. They provide financial services to people who could otherwise not access them, including loans that are specifically structured to help borrowers avoid the traps of traditional payday loans.
This option may take a bit more effort than some of the others on this list, but it’s worth exploring, especially if you have a poor credit history (or no credit history at all). A loan like this could provide you with the first steps toward rebuilding your credit.
To find one of these credit unions, use the National Credit Union Administration’s Credit Union Locator tool to search for credit unions in your area. When you find one, click on the name of the credit union, and then click the link labeled “Research This Credit Union.” The detail page will tell you whether the credit union has a low-income designation.
5. Get Paid for Your Work Without Waiting for Payday
You don’t have a ton of options when you’re stuck in the paycheck-to-paycheck cycle. But you’re not totally out of luck.
A free app called Earnin allows you to get access to your paycheck anytime you want — without waiting for payday.
Say you clocked five hours today. Whether you’re an hourly, contract or salaried worker, you can log into Earnin and get paid for those five hours. Because Earnin doesn’t want you to overdraft, you can take out up to $100 per day or $500 per pay period.
The service doesn’t charge a fee — or crippling interest rates. Earnin simply asks you to pay what you think is fair.
To use Earnin, you’ll need to meet a few requirements. You should:
- Receive direct deposits from your employer into your checking account.
- Have a regular pay schedule (weekly, bi-weekly, semi-monthly, monthly).
- Work at a fixed location or use an online timekeeping system at work. This helps Earnin confirm that you are, indeed, working.
Is All This Worth the Trouble?
If you pay it back in a month, a $1,000 credit card cash advance will typically cost 5% upfront ($50) and 2% interest for the month ($21 on the total balance of $1,050). That’s a total cost of $71, 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.
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). Editor Caitlin Constantine contributed to this report.