Credit cards don’t have to be purely used for purchases. Most also allow consumers to make cash withdrawals at an ATM like a debit card. Some providers also issue credit card cheques to their customers which can then be used like cash. Both of these cash advance methods, however, come with some downsides. Why is it generally not a good idea to use a credit card cheque or a cash advance?
Credit Card Cheques & Cash Advances Have Higher Interest Charges
Credit card companies can attach various interest rates to their products. They may, for example, have one rate for purchases and another rate for other types of card usage. The rate given to regular spending may be relatively low but other rates may be considerably higher.
If the cardholder uses a credit card cheque or withdraws money using their card then the chances are they will be charged a much higher interest rate on the cash they use. If they do not pay off all that they have borrowed when their next bill falls due, then their debt will grow at a faster rate than if they had used their card to make a purchase.
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