What happens when you transfer money from a credit card to a debit card?

Credit Card Cash Advances: A Costly Trap to Avoid

Transferring money from a credit card to a debit card, known as a cash advance, may appear enticing for immediate access to funds. However, this seemingly convenient option comes with substantial drawbacks that make it a detrimental financial choice.

High Fees and Interest

Cash advances incur significant fees, often ranging from 2% to 5% of the transferred amount. Moreover, interest charges begin accruing immediately, unlike regular credit card purchases that typically offer a grace period. The high cost of cash advances can quickly add up, eroding the accessible funds.

Impact on Credit Score

Cash advances count towards your credit utilization ratio, which is a key factor in determining your credit score. High utilization can damage your credit score, making it more difficult to qualify for loans and other forms of credit in the future.

Alternative Solutions

Instead of resorting to credit card cash advances, consider alternative options for accessing funds:

• Personal loan: Obtain a personal loan from a bank or credit union with lower interest rates and longer repayment terms.
• Balance transfer: Transfer your credit card debt to a card with a 0% introductory APR, allowing you to avoid interest charges for a limited period.
• Home equity line of credit (HELOC): Access funds from your home’s equity, typically at lower interest rates than credit cards.
• Emergency fund: Establish an emergency fund to cover unexpected expenses without resorting to high-cost alternatives.

Conclusion

While credit card cash advances may provide temporary access to funds, they come with substantial costs and potential negative consequences. High fees, immediate interest accrual, and damage to your credit score make this method a poor choice for financial management. Consider alternative options that offer lower costs and more favorable terms to meet your funding needs.