Balance Transfer vs. Cash Advance

money

Here at Xpress Cash, one of the questions we’re frequently asked is “What is the difference between a balance transfer vs. cash advance?” While both options allow you to use your line of credit for cash, there are a number of differences you’ll want to know of before moving forward with either one. Below, we’ll explore the details and advantages of each option, as well as the possible effects they each may have on your credit in Michigan. 

Differences Between Cash Advance vs. Balance Transfer

When comparing a balance transfer vs. cash advance, there are two major differences to be aware of:

  • While cash advances generate immediate funds and tend to be utilized in emergencies, balance transfers are an overall lengthier process requiring the individual to submit a request through their lender.
  • Cash advances are likely to come with higher transaction fees and APRs than balance transfers.

When to Choose a Balance Transfer

Balance transfers are intended to help individuals with credit card debt. They involve taking the debt from one or more credit cards and transferring it over to one new card. Is a balance transfer a smart decision for your financial situation? Explore a few advantages to help make the determination:

  • Your new card may have better terms. Does your current credit card have high fees or a particularly short grace period? When you transfer your balance(s) over to one new card, that new card will hopefully have better terms attached to it. 
  • You can secure a lower interest rate. In addition to getting better terms with a new card, you may also secure a lower interest rate. With a lower interest rate, you’ll be left with more money to put toward your debt balance so you can pay it off faster.
  • Consolidate your debt to make it more manageable. If you’re attempting to take care of debt on multiple cards, the situation can quickly become overwhelming and frustrating. By transferring all of your debt onto one single card, you can rest easier with one payment to make as opposed to several.

When to Choose a Cash Advance

A cash advance is a means of borrowing against your credit card limit in order to get the cash you need instantly. You’ll want to put serious consideration into this option, as it requires you to pay back the money you borrowed with interest. To help you decide whether this is a good option for you, let’s take a look at some cash advance benefits:

  • It’s a quick solution in an emergency. Cash advances are best reserved for times when you need emergency funds, fast. All you need to do is go to a bank teller or an ATM, and you’ll get the money you need (or as much as you’re allowed to borrow) right away.
  • There are no restrictions on how you can use a cash advance. Whether you need to pay a medical bill or car payment, or you need to take care of any other time-sensitive payment, you’re free to use the money from your cash advance however is necessary.

What are the Effects on Your Credit?

In addition to knowing how a cash advance vs. balance transfer differ from one another and their respective advantages, you should know how each option can affect your credit:

  • Balance Transfer Effect on Credit
    • The main risk to your credit score with balance transfers lies in the application process. When you apply for and open a new credit card, your credit score can be lowered by a few points due to the hard credit check lenders need to perform.
    • Your credit score is lowered anytime your credit card balance exceeds 30 percent of your credit limit. So, if you transfer an old balance to a new card that doesn’t have a high enough credit limit, your score could take a hit right out of the gate.
  • Cash Advance Effect on Credit
    • As we noted above, cash advances come with high interest rates. If you struggle to pay back what you borrowed because of this and incur delinquent payments on your credit report, your credit score will suffer.
    • Additionally, a cash advance might cause you to exceed your credit limit, which can also cause your score to take a hit.

Get Additional Help at Xpress Cash

If you have any lingering questions about cash advances vs. balance transfers, you can count on Xpress Cash to help. We also offer cash advance services at our numerous Michigan locations. Contact us or stop by in person to start a conversation with one of our friendly staff members today!