Finance Globe

U.S. financial and economic topics from several finance writers.
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5 Credit Card Transactions That Cost the Most


When you use a credit card, you’re technically borrowing money from your credit card issuer. And, as with most types of loans, your credit card issuer will look for ways to make a profit from what you’ve borrowed. If you want to minimize the amount of money you pay to your credit card issuer, avoid the most expensive types of credit card transactions.

Cash advances

When you use your credit card to withdraw cash from an ATM, you’re taking out a cash advance. Both your credit card issuer and the ATM owner will likely charge you an ATM fee. Your credit card issuer will also charge a cash advance fee that’s a percentage of the amount of your cash advance. On top of that, you don’t have a grace period for avoiding interest on cash advances the way you do with purchases. Interest starts accruing on finance charges right away.

Overdraft protection

You might opt to use your credit card for overdraft protection rather than being charged an overdraft fee by your credit card issuer. Whenever you make a checking account transaction that would overdraft your account, your credit card issuer will transfer a portion of your credit limit to your bank. You avoid an overdraft fee from your bank, but your credit card issuer will treat the overdraft transfer like a cash advance, charging a cash advance fee and charging interest on the overdraft transfer right away.

Money orders, wire transfers, and cashier’s checks

Any “cash equivalent” transaction is treated like a cash advance. With most credit cards, cash equivalent transactions include purchases of money orders, wire transfers, travelers and cashier checks, casino gaming chips, and foreign currency. Your credit card agreement will outline which transactions are considered cash equivalent. These transactions are charged a cash advance fee and the cash advance interest rate, which is typically higher than the rate for purchases.

Balance transfer

Balance transfers can be one of the most expensive credit card transactions, even when you’re taking advantage of a 0% promotional balance transfer offer. With most credit cards, balance transfers are charged a balance transfer fee of 3 to 5% of the balance transfer amount. If you transfer $1,000, for example, your balance transfer fee will be between $30 and $50.

Large purchases paid off with minimum payments

To be honest, any purchase that takes you a long time to pay off will cost in terms of interest. However, larger purchases, like electronics and furniture, will cost more in the long run if you pay them off with minimum payments only. That’s because your balance only goes down a small amount with each minimum payment you make. Paying large balances with large lump-sum payments saves money in interest and helps you pay off your balance faster.

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Comments 1

Frank on Monday, 25 September 2017 17:45

I don't think I have ever taken a cash advance from my CC. The fees were always 3% plus $10. Never seemed worth it to me.

I don't think I have ever taken a cash advance from my CC. The fees were always 3% plus $10. Never seemed worth it to me.
Sunday, 16 June 2024

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