The Skinny About Cash Advances

Cash advance loans are one way for borrowers to get the funds that they want quickly and easily. Available through your current credit card or through a payday loan provider, cash advance loans have been helping cash strapped individuals get through a difficult time. They can also be a financial trap if you aren't careful. Please read on and we'll take a look at cash advance loans and what they can mean to you.

Angela is just four days away from receiving her bi-monthly paycheck. Most months the fifteen day wait until payday isn't a problem, but this month Angela's son hurt his ankle and had to be rushed to the urgent care emergency room. She had to give the medical facility $50 just to ensure that he would be seen. $50 Angela simply could not spare, never mind the taxi fare to and from the facility!

For Angela, a cash advance loan is one way to solve a temporary cash shortfall. She hated the idea of borrowing money, but with the rent due in one day and the electrical bill the next, she knew that something had to be done. Thus, she sought a cash advance loan.

Option #1 - Angela marched to her bank and filled out a slip of paper requesting the bank charge her Visa account $300 for a cash advance. The bank complied and immediately Angela was charged a $9 service charge and the interest charges began. In one week's time Angela would be repaying the loan and the charges for about $311.

Option #2 - With her Visa account maxed out; Angela logged online and found a payday loan site offering cash advances. She filled out the application and had the money deposited to her account within four hours time. In one week Angela would be authorizing a debit to her checking account for $396 to cover her cash advance with the payday loan company.

In the first option, Angela's fees were in line with the industry average. She paid the 3% borrowing charge plus one week's interest. With the second option, Angela's fees were exorbitant: $30 per $100 borrowed plus interest. Her state allowed both types of cash advance loans, but clearly the latter plan carried an extra $85 charge. Had her Visa not been maxed out the first option would have saved her a bundle. Instead, the second option put her finances in peril leading to the possibility she would have to borrow again.

So, what is the moral of the story? Avoid cash advance loans whenever possible especially payday loans. They are no bargain and are likely to put additional financial pressure for you while lining the pockets of a wealthy few at your expense.