Avoid Cash Offers From Credit Cards

With the credit crisis making things worse for consumers it can be difficult to find ways to purchase the necessities, let alone take care of emergencies.  Many of the home loans and unsecured loans are being taken off the market.  For now it seems that numerous UK residents are turning to credit cards to answer their needs, but it could be a mistake depending on how you try to supplement your income with credit cards.

Credit card companies are sending out balance transfer options as well as cash offers.  The credit card offers are for cash withdrawals.  The companies are offering deals for withdrawing cash that are at a reduced rate for the transaction fee.  They are not giving a break on the interest for these offers though.

They are trying to get consumers to take the offer to make more money in a way that makes many consumers think twice.  For example, they are advertising instant cash for supplementing strained incomes.  The sad thing is it isn’t taking a lot of persuasion to talk consumers into the cash deals.  Those who are suffering or just need a break are taking the helping hand, without taking into account any of the consequences.

There are several consequences regarding the cash withdrawals though.  Most cash withdrawals through credit cards will charge 23 to 34 percent interest.  This is nearly double the interest being charged for regular purchases.  Not only are they offering these cash withdrawals, but they are also adding more to the offer.  A consumer can take out more cash using their credit card than before.  It used to be that you couldn’t take more than 500 pounds, but now you can take up to the maximum credit limit.  If a consumer has a card with 7,000 pounds for the limit and the balance is 2,000 pounds, the consumer can take out the other 5,000 pounds as a cash withdrawal less fees. 

By raising the limit on how much you can withdraw it makes it easier to think of the credit line as a much needed loan.  For individuals struggling to pay their mortgage or make needed car repairs, the cash withdrawals seem like the right answer.  However, the high interest and fees could make it worse.

Debt Advisors are trying to help consumers see that they need a different answer besides credit cards withdrawals.  It is best to shred the cheques for cash withdrawals and avoid ATM withdrawals with credit cards.

Instead these advisors are trying to find answers to help lower expenses during the month, by offering suggestions such as changing energy companies or mobile phone companies.  Credit cards are not completely evil.  They do have their uses, but it is best to allow them to work for you and not get caught in traps like cash withdrawals.  This just makes the situation worse with no end in sight.  The money still has to be paid back, and it is usually the last balance to be paid down.

Back To Credit Card Updates July 2008