Credit Card Cheques & Cash Advances

Once you’ve got a credit card, you’ll find that you can do more with it than just pay for things with the card. You might be sent a credit card cheque book, for those times when you’re paying someone who can’t accept your card.

You might also be offered cash advances - a way of withdrawing cash directly from your credit card, either to your bank account or from a cash machine. This is designed for when you need cash in an emergency.

With most cards, cheques and advances are charged at a much higher rate of interest than normal spending. You often give up any interest-free period (which can be up to two months), meaning that you start paying interest on the money literally from the minute you spend the money.

Not only that, but most cards will also charge a fee each time you use cash advances or credit card cheques - and using an ATM may increase the fee even further.

When you use a credit card cheque or accept a cash advance, you’re showing that you’re not just using a credit card for convenience - you really need the money. This marks you out in the credit card company’s records as someone who shouldn’t be given a good deal. After all, you won’t be going anywhere.

Instead of using cash to pay for small things and finding you have to take advances or use cheques to pay for bigger things, it’s better to do it the other way around. If you’re in a situation where you’re relying on advances, you should start using your card for smaller things where you wouldn’t usually bother, just to avoid taking the advances and paying more interest. Be strategic in how you spend.

Remember that there are very few bills now that must be paid for by cheque, so there aren’t many reasons to ever use credit card cheques. If you’re willing to call them up and wait in their queue for a while, the chances are you can get them to accept a credit card payment just by you reading the number.

If you start relying on cash advances, sooner or later you’ll probably run into an advance limit. The credit card companies don’t advertise it, but many of them have limits on how much of your balance can be cash advances and how much must be in purchases.

When you pay back your credit card debt, most lenders will put your payments towards the lowest-interest money (your purchases) first, and then towards other lending.

That means that you keep paying that high interest on the cash advance or cheque until you get your balance all the way down to zero.