The next time you head to the ATM machine to use your credit card for a cash advance, keep in mind it probably won't be inexpensive money. Despite the fact that the terms and conditions of cash advance transactions are included in monthly statements and card-owner agreements, many people miss the information and don't realize how much they are spending on fees and interest rates.

Credit Card Fees Costly, Not Convenient
For instance you might not know that when you use your credit cards to withdraw cash, a costly chain of events might follow. First your credit card company most likely charges a transaction fee for the convenience of utilizing their service to access cash. Over the past few years this cash advance transaction fee has grown steadily throughout the industry. Even though the exact figure charged varies from credit card company to credit card company, the overall range has increased across the board. As recently as five years ago, most card issuers charged a minimum cash advance fee of 2% with a $2 minimum and they capped the amount of the fee at a $10 maximum. Nowadays cash advance fees generally start much higher and maximum fees are a thing of the past. It is not unusual to find minimum fees of $10-and some are as high as $20.

If you use a credit card to obtain cash, an easy and relatively painless way to minimize your cash advance fees is to withdraw one large sum in a single transaction, rather than several smaller amounts over a period of time. This will allow you to access your money conveniently while only paying one cash advance fee, lowering your overall expenditures.

Higher Interest Adds Up
Transaction fees aren't the only cost to consider. For instance, interest rates on cash advance transactions are also on the rise. They consistently exceed the interest rates charged on purchase transactions, with average cash advance interest rates running at between 19% and 24%. In addition, cash advance transactions (unlike purchases) begin amassing interest as soon as the money is withdrawn-there is no grace period. With this immediate interest rate kicking in, and at such relatively high levels, the expense of your simple cash advance transaction might begin to outweigh any convenience that it offers you. Moreover, many credit card agreements now specify that your payments will be credited to any lower interest rate balances before they reduce the higher interest rate portion of your debt-which could add even more to your total costs.

Certainly, there are times when a cash advance from your credit card can be a valuable financial option. But to make the most of it, make sure you understand your card's terms and rates, so you can plan accordingly. Knowing the costs of convenient cash will help you to decide when-and if-a cash advance is the way to go.

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