Small business credit cards are generally used for making essential purchases, but most will also allow you to get a business cash advance. And while some may consider credit card cash advance as being much like withdrawing cash with an ATM card, there are many important, and potentially expensive differences.

Here are some of the things that you actually need to consider about credit card cash advances before you ever consider doing one:

  1. Higher Interest Rates

Most small business credit cards will have a higher interest rates for cash advances rather than for purchases or balance transfers. This higher interest rate represents the accelerated risk of default associated with customers that are desperate for cash.

  1. High Fees

Additionally, paying a higher interest rate on your credit card cash advances, your card issuer will likely impose substantial fees for the transaction. It is not unusual for a small business credit card to charge a cash advance rate of 5% or $15 whichever is greater.

  1. No Grace Period

The reasonable way to use your credit cards is to keep away from interest rates by paying your monthly statement balances completely. However on the subject of cash advances from your credit card, there is no grace period. Whenever you are making a cash advance, you will incur interest rates on that amount from the day of the transaction until you pay it off.

  1. Foreign Transaction Fees

Probably, many credit card users conduct cash advances not because they are short on cash, but because they are in a foreign country and they don’t have any other way to access the local currency. However similar to purchases made outside of the US, your foreign cash advances can still be exposed to a foreign transaction fee, which is usually 3%.

  1. ATM Fees

Other than the high interest rates, cash advance fees, foreign transaction fees and no grace period, your credit card cash advances can still incur ATM fees charged by the owner of the equipment. In case you are calculating, that is a total of three different fees that you could doubtlessly be charged by a single transaction, and that is before you figure out the cost of interest rates.

  1. Set Account’s Cash Advance Limit

Another way to limit the expenses of a credit card cash advance is to set limits on the account. To try this, contact your card provider and specify a maximum amount that can be authorized. Actually, you can set your cash advance limit on your credit card at $0, so you can prevent any cash advances from being approved.

Alternatives to Credit Card Cash Advances

The easiest alternative to using your credit card to access cash is to use a debit or prepaid card with ATM access. In case you need to make a payment to an individual or business that doesn’t accept credit cards, then you can consider one of the many E-payment systems that accept credit cards. Normally these payment systems carries a small fees, which is usually 3%. And in case, a merchant will accept debit cards instead of credit cards, you could use prepaid credit card purchase.

Small Business Financing News │ Merchant Advisors | blog
6 Considerations for Credit Card Cash Advance
6 Considerations for Credit Card Cash Advance
Looking for funding to fund your small business? The road ahead is full of twists and turns because it does require a lot of time and research to locate the best funding program that suits your business. Due to theRead more
Using a credit card cash advance is expensive. Read this article to understand the costs associated and what you need to consider before applying for one.
Merchant Advisors
Merchant Advisors