Cash Advance?

Drez

First of all, I know Cash Advance against a credit card is a Bad Idea (tm) but I was kind of screwing around yesterday and I intend to pay it off immediately. I just want to understand how it works. I have two questions:

1) I was told that Capital One charges 3% or $10 (whichever is larger). I took out $20 yesterday at a Chase ATM which charged me $3. I checked my Capital One statement and I expected to be charged $33 but it was only $23 and it is listed as "Other" for type. I don't understand?

2) I understand that there is a different APR for Cash Advances than normal purchases. If I pay off, say, 50% of my credit card balance (which includes the Cash Advance and some purchases) before I even get my bill, how do I know how much of my payment is allocated to the Cash Advance, and how much is allocated to the purchases I made?

Nobody

Drez wrote:

First of all, I know Cash Advance against a credit card is a Bad Idea (tm) but I was kind of screwing around yesterday and I intend to pay it off immediately. I just want to understand how it works. I have two questions:

1) I was told that Capital One charges 3% or $10 (whichever is larger). I took out $20 yesterday at a Chase ATM which charged me $3. I checked my Capital One statement and I expected to be charged $33 but it was only $23 and it is listed as "Other" for type. I don't understand?

2) I understand that there is a different APR for Cash Advances than normal purchases. If I pay off, say, 50% of my credit card balance (which includes the Cash Advance and some purchases) before I even get my bill, how do I know how much of my payment is allocated to the Cash Advance, and how much is allocated to the purchases I made?

1) The actual cash advance fee may not have been assessed yet. What you are seeing is the $20.00 that you took out plus the $3.00 that the ATM charged. The fee from your credit card is (usually) a separate charge.

2) YMMV, but with most credit cards I've seen all payments are applied to the lowest interest rates first. Basically what this means is that if you have any balance at a lower rate, it'll have to be paid off fully before it gets applied to the cash advance balance.

EDIT: Ignore 2) above as I had forgotten this particular situation was covered by the CARD act. See replies below for the correct answer.

LaPuzza

1) Don't ever, ever, ever do this. I can't stress this enough.

2) It often takes a few days for a bank to get its act together and figure out how to actually catagorize these things, and the idiot fee may not show up until the statment gets run.

3) The payments will be applied to lowest interest rates first, so if you have $500 on a 0% balance transfer, and $33 on cash advance, and you pay $33, they'll treat that as you paying off the interest free portion an then charge you interest on the $33 at the highest rate. Figure out the way that the bank makes the most money, and assume that's the rule. You will likely never be wrong. Alternatively, read your agreement.

4) If you are the kind of person that needs to use credit for cash, things will go badly for you. However, if you're the kind of person that just likes the convienence, the way to go is a Discover Card with "cash-over" on purchasing. http://www.discovercard.com/customer-service/account/cash-over.html This isn't a cash advance, it's 99% money. For example, I go to Kum and Go or Kroger or WalMart and spend $100, I can get $80 cash out of the register on my Discover Card without a fee and, if I pay it off on the next statement, no interest. I swipe my card for $180, get $180 in goods and cash, and pay $180 on my statement, and get $1.80 in Cashback Bonus. How can that be possible? Because people that don't pay everything off or use cash advances make Discover so much money that they don't mind me winning on this deal.

Drez

This was just a one time thing because I was bored and curious. I'm not going to do this in the future, I just was interested in the mechanics of it. Okay, so it was a $13 lesson, but whatever.

Thanks for the info. I plan on paying the balance off entirely this month anyway.

Djeet

You should check your cardholder agreement, but the CARD Act mandates that payments over the minimum payment should be applied to the highest interest rate balance first.

Janson

Djeet wrote: »

You should check your cardholder agreement, but the CARD Act mandates that payments over the minimum payment should be applied to the highest interest rate balance first.

Yeah, we did this twice last year (pet deposit, and then moving in a hurry) and each time we paid it off within the same month, and it was applied to the highest interest rate balance first. It doesn't really appear to have negatively affected us or our credit (which is still excellent...)

Figgy

Well, it won't be applied fully to the highest interest. It will likely be applied to a percentage. It's too easy to take advantage otherwise. If you get a low interest rate promo check, for example, you could write yourself a check for the balance of your statement and convert your entire credit card debt into 1% instead of 19.99%.

What they do for most banks in Canada:

You have $500 oweing at 20%
you have $500 oweing at a promo of 1%

You out $500 down on your card. Because your bill is 50% one rate, 50% the other, that is how your payment is applied.