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Is a taking out a cash advance a good currency conversion move?

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Your credit card gets a pretty decent currency conversion rate. So is getting a cash advance while abroad just as cheap? A close relative of mine recently asked that question. While a cash advance can come in handy in an emergency, it’s generally a bad idea.

Watch out for high interest rates

The exchange rate on your credit card is most likely decent. That’s because most credit card companies get wholesale rates and offer them to their customers. And a lot of credit card companies have done away completely with foreign transaction fees, making it even cheaper to swipe your card abroad.

But interest rates on credit cash advances don’t mimic the low cost of credit card currency exchange. In fact, a lot of card companies will charge more than 20 percent on some cards. And as soon as you take out the money, the interest starts accruing. If that’s not enough, there’s generally a flat fee for taking out an advance. Add a conversion fee on top of that and you have one expensive transaction.

Give you bank a call

If you’re curious about a cash advance, call your bank and ask what it charges. A lot of banks change fee structures on a regular basis. So it’s wise to ask about current rates and fees.

It’s best to reserve your advance card for when you’re in a bind. It can be worthwhile to get an advance if you have exhausted all of your other options. You’ll just need to pay it off as fast as possible.


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