Is a cash advance the same everywhere? The annoying answer is both yes, and no. Yes, because the bottom line is you get advanced cold, hard cash, but also no, because there are different sources of cash advances. What are some examples?
-You advance yourself cash off of your credit card.
-Your spouse requests an advance on their pay at work.
-You apply for a payday loan that you will repay automatically on your next payday.
These are all examples of “cash advances”, and the terms & conditions vary depending on what the advance source is. Simply put, a cash advance service lets you withdraw cash, either from your own bank account, an ATM or off of a credit card, of a certain amount or within a certain limit. Most credit cards, for example, allow you to advance yourself cash from your line of credit. For credit cards, you’ll often incur a fee each time you use this service, and there may or may not be a higher interest rate on the amount advanced. If you pay off your credit balance every month, however, you can generally avoid any interest on cash advances (another reason to get your credit card debt under control!)
However, in terms of payday lending and short-term lending, a cash advances is really money that belongs to you – you’re simply in the process of earning it; you just haven’t received it yet. With payday lending services in Ontario, the maximum fee that is charged on a cash advance per $100, is $21. In British Columbia, it’s $23 per $100. While this may seem like a lot compared to standard credit card advance fees, this service exists primarily for those times where all other sources of cash flow dry up.
Consider the following.
Your credit card is maxed out for some reason and you’re a week away from your next paycheque. Something urgent has come up – a birthday that you forgot about; your glasses broke and you can’t submit another claim to your insurance for eye-ware this year; you blew a tire on the side of the road; your video card on your computer broke and it needs replacing ASAP. These are all great examples of life poking a stick at you and getting in the way, right?
If you can’t borrow money from friends or family (or don’t want to), you have two options: 1) You can try to ask your credit card company to increase your limit (but this will negatively affect your credit rating…and there’s no guarantee you’ll be approved), or 2) you can use a payday loan service and pay the fees to get your hands on the cash you need in under an hour. Sure, you might be out $21 bucks/$23 bucks per $100 you borrow, but it might just save your backside without having to resort to damaging your credit (just make sure you pay it back!).
Like with any kind of cash advance emergency, it’s important to weigh your options and weigh your ability to pay it back. A responsible lender will not give you more than is reasonable for you to take. Only apply for what you need and try to keep your lending options within one payday lending company. Having multiple loans out with multiple payday lenders can negatively hurt your credit score, especially if you can’t pay it back on time. It may also affect your ability to get cash in the future.