Credit card options differ between companies; and, it goes without saying that some have more perks than others. Balance transfer vs. cash advance vs. introductory APRs. What’s the difference between these factors, and how do they help me build my credit?
Increasing your credit score
From the moment you accept your first credit card to the time you become inactive, your credit score fluctuates. Actions that will help your score include:
– keeping a low debt-to-income ratio
– preventing automatic closures of your accounts
– paying more than your minimum balance
If you’re deciding between a balance transfer vs. cash advance, both can work to your advantage. The main difference lies within the frequency. Balance transfers occur once as the account opens, while cash advances can happen more often. Another difference, which we will discuss more below, is the impact on your future payments.
How balance transfers work
Balance transfers work by moving an existing credit card balance to a new account with a lower rate. They help customers resolve debt by cutting off a chunk of the interest.
Currently, Achieva Credit Union provides an introductory 2.9% APR on balance transfers* with no fee. You can use it to consolidate high-interest debt and reduce your monthly payments. To apply, call 727.431.7690 or visit your local branch.
When applying for a balance transfer, credit card debt isn’t the only type of balance you can transfer. Many issuers allow cardholders to move other debts, such as auto loans or personal loans, as long as they originated from another company.
What does Cash Advance mean?
On the other side of the spectrum, a credit card cash advance is a withdrawal of cash from your credit account. You still have to pay it back, and it does not lower your interest.
Cash advances are for times when you need cash instantly. They are short-term loans against your credit card and will reflect on your revolving balance. Many cash advances have supplemental fees for using the service. In most cases, these fees are less than the costs of defaulting on other bills.
While the reasons for taking out a cash advance vary, it’s necessary to assess each situation independently. Keep in mind that credit card holders can take out multiple cash advances as long as they stay within their credit limits. Because borrowing cash is so easy, users must be careful not to overdo it.
Balance transfer vs. cash advance
If you’re still undecided about a balance transfer vs. cash advance, go back to the fundamentals of good credit. Your goal should be to use credit wisely by maintaining a healthy debt-to-income ratio. If one method gives you a rate that assists with your monthly budget without putting you further into debt, it may be the better choice.
*APR = Annual Percentage Rate. Follow the link for full details.