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Why Avoid Cash Advances

By March 20, 2017 No Comments

Why Students Should Avoid Cash Advances at all cost

Post-secondary education demands massive financial investment and most families do not earn enough to support their children financially. Some options include either taking cash advances or student loans. However, before choosing either of them, you need to know the risks involved, so you will not be making a mistake that you will regret later.


So a little bit of research or asking few questions can save you from a lifetime of regret. However, if you are a student with financial challenges, the last option you should try is taking cash advances. Though the offer may sound tempting, there are things that will make you regret ever accepting such. Cash advances are expensive and will cause you to incur more debt. Though it is readily available, but the terms attached are scary.


Apart from being expensive, other things make cash advances a terrible alternative for students.


The Fees of Cash Advances

Cash advances attract a fee, which could be a minimum flat rate or a percentage of what you received. This means the more you receive, the more the charges would be. For loans, though you have to pay certain interest, however the amount will not be as high as that charged for cash advances. This makes student loans a better option for students. Even though you are financing your education with borrowed funds, it is better to keep debt down as much as you can. Look for a better deal and borrow with low interest.


Cash Advances Attracts ATM fees

The cash advance fees are not the only charges you have to pay. In addition to that, you have to pay for ATM fees too, which ranges between $2 and $5. The cost also depends on the bank’s ATM you make use of. Your credit card issuer and ATM operator may both charge an ATM fee. This would increase your debt. However, all these charges are not attached to student loans. You only get to pay back the money borrowed and interest.


Cash advances have higher interest rates

Cash advances always attract higher interest rates, which are not useful for students. Even though one can get a good job and pay back, another problem is that the longer it takes to pay off cash advances, the more the interest would be. The interest rates on student loans are much lower. In fact, they are more convenient for students who are just beginning life after graduation, to pay back.


Cash advances have no grace period

For a student who needs time to acquire a degree and then look for a job, cash advances are obviously not a good option. The grace period is not available for cash advances, and you do not get the opportunity to pay back in full and avoid a charge. In fact, the first day you collect the money, the interest starts accumulating. You might even gather a lot of interest before your first statement arrives. However, student loans have a grace period, which begins after graduation. The grace period is often 6 months after graduation or longer. This allows the individual to look for a job and start paying his or her loan conveniently.


Cash Advances can affect cash flow

The reason for taking up cash advances is to meet financial problems, but remember that you need to pay your advances eventually. So if you do not have enough money to pay your bills, how will you have funds to pay your cash advance? Students who take cash advances are more likely to default, than those who took other loans.


It can affect the student’s Concentration

As a student, if you want to concentrate and have good grades, then cash advances not a way go area. You can become unnecessarily worried and lose concentration because of the thought of high-interest rate, and how to pay them back. This can affect your grades since your attention has been divided. However, student loans have a grace period of approximately six months, which is enough time to search for a good job after graduation.



Cash advances bear more risks than student loans. They also have higher interest rates, no grace period and other fees that increase the amount students have to repay. Though financial aids like this can help students achieve their college dreams, however repaying the funds can become problematic due to higher interest rates. Moreover, since these advances start incurring interest even from the first day, it is a greater risk for students who have not started working.