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What is a Cash Advance?

Cash Advance is a service allows a credit card holder to withdraw actual cash up to his/her current credit

The idea of cash advance attracts borrowers because of it’s a fast & easy way of getting quick actual cash. The lender makes a credit check of the card holder and provides quick advance cash specific to his credit limit.

There are specific policies that are generally practiced by the lender. The lender may demand the card holders banking details.

Online cash advance provider (lenders) makes it even easier to apply for a cash advance loan. Some online cashadvance lenders provide cash even without making a credit check of the card holder.

Cash advance is more like a payday loan they are borrowed to meet a person’s urgent financial need.

Types of cash advances


There are two kinds of cash advances:

[1] Direct Deposit and Check Cash Advances: The lender in this case doesn’t have a limit cash advances on the basis of current credit balance provided the cash amount doesn’t exceed the total credit limit.

In Direct Deposit the borrower in this case is suppose to write a check or can ask his bank to directly transfer the fund to a particular account.

[2] Bank Cash Advances: There is a Cash Credit limit in this case. A borrower can withdraw a certain percentage of the total credit balance; he can also withdraw cash from ATM.

When it is needed?


When the current debit balance of the account holder is not sufficient to provide enough cash he opts for a cash advance.

When a person is required to pay by cash only and he is running short of it.

Interest charged


The lender normally charges fees of 2 to 3 % on the total withdrawal amount. There are other charges Which are imposed on the borrower like Transaction fees, APR (Annual Percentage rate) which is normally higher than a simple credit purchase..

Merchandise cash advance

Any small business owner requires capital to carry out his business activities. Merchandise guaranteed cash advance serve the purpose of providing sufficient fund to meet the requirements of such small enterprise against their future credit card sales.

It can be considered to be an alternative to small business loan. The cash advance provider offer a lump sum amount to the businesses against a share of their future credit sales. The target audience‘s in this case are retailers, service companies or small organization which are unable to borrow from banks.

The interest rates can range from 60% to 200% APR, according to Leonard C. Wright, a San Diego accountant and "Money Doctor.

Abiding the law


There is no law that can restrict the lender to charge interest in a certain limit. The cash advance provider directly deducts some percentage of out of borrowers Credit balance in the month end.

In case of Merchant Cash Advance the lender deducts a percentage of amounts from the businesses daily credit sales.

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