Whenever you face a financial emergency, utilising credit card cash advances can be a viable alternative. However, what if the credit card offers some additional perks, such as avoiding the overdraft fee? Read along to learn more.

What is a Cash Advance?

A cash advance is one of the many credit card offers that have been the talk of the town. It allows individual cardholders to borrow money, corresponding to their credit requirements and credit limits. Despite drawing higher interest rates, one of the major advantages is the immediate transfer of funds. In case of immediate monetary requirements, this option can be a great help.

Cash advances are an immediate measure of cash withdrawal. You can withdraw cash from your nearest ATM, home branch, or even through net banking. However, this incurs a separate fee and other charges. To be more specific, the Annual Percentage Rate (APR) is higher for credit card cash advances. Thus, credit card cash advances are only chosen when there are financial emergencies.

What is an Overdraft Fee?

Overdraft is essentially a lending mechanism provided by banks to their customers. As the name suggests, it allows an account holder to execute a transaction, despite having an insufficient account balance. Like any other loan, the account holder has to pay interest for the overdraft amount. Paying the comparatively higher overdraft fee can, in turn, become a pain in your neck. So, the onus is on us to respond wisely to emergency financial needs. 

Steps to Avoid Overdraft Fees

Rising overdraft fees can be suggestive of financial mismanagement. It can even stem from the disordered use of credit cards. However, we can still choose better and redesign our expenses to minimise unwanted bills. Financial discipline comes with sensible financial practices like reducing unwanted expenses. Let’s now analyse some of the major steps that can be pivotal in avoiding overdraft fees.

1. Set up Account Alerts

Account alerts are one of the ways by which we can reduce unwanted overdraft fees. If we turn on account alerts, we can get to know whenever our funds go low. It also lets us devise alternate strategies to account for our fund shortages. Getting notified while our funds fall short is also one of the ways by which we can reduce our unwanted expenses. Also, this can make credit card cash advances one of the last resorts and avoid additional charges.

2. Track Balance Regularly

Tracking your balance is a fundamental way to avoid extra charges. If you are regularly updated with the transactions happening in your account, the chances of incurring overdraft charges can go down. If you have monthly transactions in the form of bills, recurring deposits, or other transactions, ensure to keep an eye on them.

Balance tracking also helps you make informed financial decisions. Regularly tracking your funds reduces the chances of losing control of your financial drive. It also helps you think of alternate sources of income rather than banking on charge-intensive credit card advances.

3. Devise a Suitable Repayment Plan

A suitable repayment plan is pivotal to any form of borrowing, and credit card cash advance is no exception. As the overall interest rate accrued over time, it is highly necessary to devise a practical repayment plan. It is also noteworthy that the overall interest amount will rise exponentially in case of default payments. With the exorbitant rates of cash advances, things can turn topsy-turvy. Hence, it is essential to establish a practical plan and redistribute your finances accordingly.

4. Think of Alternatives

Though credit card offers are a dime a dozen, payment defaults can wreak havoc for you. Try not to exhaust your savings, and have something in backup for difficult situations. In case, you are in urgent need of money, credit card cash can be helpful.

Also Read: Difference Between Credit Card and Debit Card

Conclusion

The option of withdrawing cash from credit card seems tantalising. But for sensible financing, it is better to avoid frequent usage of this choice. This reduces the unprecedented charges you may have to pay for not playing it smart. Always remember, a penny saved is a penny earned. 

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