 |
 |
|
|
|
|
What is Cash Advance ?
Cash advance can be defined as the
process in which one can obtain an immediate loan from his
credit card issuer. The detail of this amount is maintained in
his account as a separate outstanding balance and interest is
charged from the date of its receipt to the actual day of
repayment. Some companies charge a processing fee based on the
amount of advance taken along with a higher rate of interest.
Thus it can be defined as a personal loan (something ranging
between $200 to $500) that can be availed to cover emergencies
like hospital bills, mortgage payments or car payments.
However, to avail the cash advance
service one must fulfill the following criteria
• The requestor must be at least 18 years old.
• Must be an earning member.
• Must earn more than $1000 (take home); though this amount
varies from one bank to another.
• He/she must have a savings account with the bank.
• The details of the workplace including the office phone number
and the email address along with the residence mailing address
must be provided.
|
|
|
|
|
|
|
|
|
|
In today’s world of plastic money,
cash advance is an option provided to the users by which they
can take a loan from the bank against their current balances. In
most of the cases the amount of cash available to the consumers
is only a small percentage of their total credit limit. The bank
generally provides two sets of numbers in their statements, the
credit limit and the cash advance limit.
Getting a cash advance is just a matter of a few minutes - the
user can go to the nearest ATM and withdraw the required amount
with the help of his credit card. Provided that the amount
requested for does not exceed the current cash advance limit
given by the bank, the ATM or any other banking electronic
device should not have any problem in giving out that money. If
the requested amount exceeds the limit, the ATM does provide the
currency but electronically flags the account.
|
|
Though credit cards and debit cards
are accepted almost everywhere, there are still a few service
providers who prefer direct cash method. In such cases, the cash
advance facility comes in handy. Even in emergencies, the best
method is to take a cash advance from the bank against the
credit card balance.
In spite of all these advantages, it
must be remembered that opting for a cash advance facility can
prove to be expensive. The borrowed money is added to the
account of total money owed to the bank which invites high
interest rates and other financial charges.The interest rates
can soar as high as 23% at times, thus reducing or even
nullifying the advantages of cash advance. So it is always
prudent to borrow enough money required for the situation and
repay the cash advance at the earliest.In a typical situation,
there are no credit checks, income verifications and asset
evaluations that are performed while a cash advance loan is
being given to the requestor.The person lending money takes a
big risk by not checking the credit report of the
person. However, the banks do a credit check to verify the
“credit risk” of a consumer before approving and issuing the
loan. It is always better to get a cash advance loan instead of
taking a debt for a requirement. Unlike a debt, cash advance
does not have a specific time for repayment which means no
monthly EMIs. This is a major advantage of a cash advance and
hence preferred by certain businesses and plaintiffs who are
looking forward to some unfinished legal claims and settlements.
|
|
A cash advance loan is often a much
better way for a person or business to obtain capital because
they are not taking on debt. Obtaining debt means that a
business must have the obligation to pay interest payments on a
regular basis which may be difficult for a business that does
not have the ability to have steady cash flow. A cash advance
means that not monthly payments are due and that the advance has
no pre-determined time when the principle must be repaid.
The Deferred Presentment industry
more commonly known as the cash advance or pay day loans is one
of the fastest growing sectors in today’s consumer finance
industry.Over the past few years, most of the governments have
tried to maintain a regulatory environment that satisfies this
huge consumer demand for the quick, short term and low
denomination loans.
|
|
|
|
The State policy makers have tried
to create a balance between the finance industry and the essentials
consumer protection laws to ensure that both enjoy the benefits of
the product. This is why there are hundreds of satisfied clients all
across the globe that enjoy savor the convenience and economical
benefits from the pay day or cash advance services without any
hassle.It is expected that the customers understand the product and
utilize the services rendered responsibly.The situation can be
compared to that of a commuter waiting for a cab. Just as the
commuter realizes that this taxi service is convenient for short
term travels, the client availing the cash advance facility must
understand that this service is useful and economical for short term
financial needs – thus this acts a financial taxi for the
middle-class when there is an unexpected financial crunch. The
alternative arrangements available in the market include pawn loans,
bank overdraft protection, paying penalty for late fees and others.
All these options are much more expensive than the cash advance
facility.
How does
this method work?
The requestor writes a personal check for the loan amount along with
the service or other finance charge that ranges from $10 to $35 for
every $100. The money is given to the client but the check is not
deposited in the bank until a future date which typically ranges
between two to four weeks. The process requires a few documents like
bank statements, a recent pay check and drivers license.
|
|
Article Contributed By: Sukanya
Banerjee
|
|
|
|
|
