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Convenience Can Be Costly:Understanding Cash Advances by James H. Dimmitt
You’ve just opened your credit card bill and attached to your statement you find a “convenience check”. It’s probably already filled out with a dollar amount such as $300, $500, or even $1,000. Your mind fills with ideas of what you could buy with this “instant” money. A new fall wardrobe, dinner and tickets to a show, a weekend getaway.
I have one important word for you - STOP ! Before you head out shopping, you should be aware that your “convenience check” is nothing more than a cash advance on your credit card. And cash advances on credit cards carry many extra fees, often overlooked or misunderstood by consumers.
Here’s a quick look at the types of fees most card issuers charge for a cash advance:
1) Upfront fee of 2-4% of the amount advanced. On a $1,000 cash advance your fee will range from $20-$40 in addition to the interest charges.
2) Higher interest rate than on purchases. Many credit card companies charge 18% or more on cash advances. In addition, most companies apply only a small percentage of your monthly minimum payment toward the cash advance.
Some require that you pay down the balance on your purchases first before applying payments to the higher-interest advance. In other words, you’ll be paying fees and interest on your cash advance for a long time, especially if you only pay the minimum payment.
3) Cash advances normally carry no grace period. This means interest charges accrue as soon as you withdraw money or cash the convenience check.
By law your credit card company must disclose any fees associated with a cash advance. The easiest way to find out what fees are charged is to carefully read your credit card statement or to call your credit issuer’s toll-free customer service number and ask questions.
Credit card companies charge these fees for two main reasons. One, to cover the costs to process this transaction which are often higher than a regular credit card purchase. And secondly because of the percentage of defaults among credit advance users. These costs are then passed along to you the consumer in the fees and interest rates associated with a cash advance.
The next time you are tempted to cash that convenience check or withdraw money from an ATM using your credit card, be sure you understand all the fees as well as the long term effects of using a credit card cash advance.
© 2003, James H. Dimmitt
MONEY TIP OF THE WEEK:
TIP #1 -You can save more than $100 a year in fees by selecting a checking account with a low (or no) minimum balance requirement that you can, and do, meet. Request a list of fees (including ATM and debit card fees) that are charged on these accounts.
TIP #2 -Banking institutions often will drop or lower checking fees if paychecks are directly deposited by your employer. Direct deposit offers the additional advantages of convenience, security, and immediate access to your money.
7 Cost Cutting Tips by Kara Kelso
Today's market is rough, so all of us are looking for ways to cut costs. Here are just a few that you can try for yourself:
1. Shared plans with cell phones.
If you have a cell phone that offers shared plans (two or more phones sharing the same minutes for a small extra fee) and have a family member that you can trust, ask them if they would like to split the bill with you. My normal cell phone bill was $45,
but only $15 for an extra phone and number that a family member has. We split the bill and now each of us only pay $30/month. Not bad for free long distance!
2. Watching for "free admission" days
Many places offer "free admission" days or weekends for children or entire families. Even discount days or weekends can help your
budget. Watch for these so you can take your family on a special outing.
3. Only eat out on "Kids Eat Free" nights
Several restaurant chains and local places have specific days of the week where children eat free. If you only eat out on these specific days you will see a significant drop in your monthly expenses. (Children can eat more than you think sometimes!)
4. Prepare Home Cooked Meals
Even if you are too busy, just cooking quick and simple meals a 3 or 4 times a week can keep you in left overs for days. One of the simplest are roasts that you can just throw in the oven and
forget about for a few hours. If it's a large enough roast a family of 4 can make meals out of it for days (just don't forget to throw in several potatoes with it!).
5. Buy the "cheap" brands
Most the time the cheap brand is just as good as the name brand, minus the fancy label of course. If you are buying the cheap brand for an ingredient in a home cooked meal, I doubt you or your family can tell the difference.
6. Reusing SOS pads
A very small cost, but a way to cut it all the same. Instead of just using that SOS pad once and throwing it away, use it several times. Be sure to put it back in the box with the rest of the unused pads so that it keeps.
7. Limit shopping to once a week
We all know the importance of shopping lists, so be sure that you have everything on your list. This includes all ingredients that you need for meals in that week. Limiting your shopping trips will help not only on the costs for gas, but also on impulse buying costs.
There are many, many more ways to cut your costs, but I hope that these few simple ones will have a positive impact on your budget!
ABOUT THE AUTHOR: Kara Kelso is the owner of Mom's Market, which is an online mall where shoppers can support mothers by purchasing products and services from a mom-run business. Visit:
http://www.momsmarketonline.com
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