It might be worthwhile to transfer a cash advance amount to a promotional 0 percent APR balance transfer offer, if you are disciplined enough to pay it off in time.
Reader Jennifer, for one, is thinking about this. Instead of just taking out a credit card cash advance, though, she is savvy enough to weigh whether it would be possible to immediately transfer the cash advance amount to a different credit card with a 0 percent APR balance transfer offer. That way, she hopes to avoid the high interest rate on cash advances.
Cash advances come with a high cost
Jennifer is right to be wary of cash advances and their costs. There are different ways of taking out a cash advance. You could deposit the cash advance convenience checks your card issuer sends you into your bank account. Or, you could do it using a bank ATM if you have a PIN for the credit card. You could also deposit the convenience check with a bank teller.
Cash advance offers typically carry a transaction fee, usually 3-5 percent, and there is no grace period for the interest charges – which tend to be in the mid-20 percent range – to start kicking in. And if you deposit the check using an ATM, there could also be an ATM fee.
With a balance transfer, you would likely pay a transaction fee, also in the 3-5 percent range. With a 0 percent balance transfer offer, you would not pay any additional interest on the amount borrowed until the promotional period ends.
See related: How to minimize the cost of a cash advance
Promotional balance transfers have pitfalls, too
A promotional 0 percent balance transfer offer is not an unalloyed blessing, though. If you make any purchases using the card on which you are carrying the promotional balance transfer, you would not enjoy any grace period for interest charges on the purchases – unless the card also offers a 0 percent promotional period on purchases. So even if you don’t pay interest on the balance transfer during the promotional period, interest would apply immediately on the purchases.
Even if you fully pay off the purchases monthly, the interest charges would still apply as long as you carry the balance transfer. Moreover, minimum payments you make would apply to the lowest interest rate balance (which would be the balance transfer), and only payments above the minimum payment would go toward the purchase balance.
This means you should not make any other purchases on this card to really enjoy the 0 percent interest promotional period.
See related: Can you really win the balance transfer game?
Rolling over cash advance into balance transfer
If you roll over a cash advance into a 0 percent promotional balance transfer, you still won’t be able to avoid the transaction fee for the cash advance, as well as the interest fees you will incur until your balance transfer goes through (which could vary typically from a week to up to 21 days).
In the meantime, you would have to continue making at least the minimum payment on your cash advance card until the balance transfer goes through. And the balance transfer would also typically carry a transaction fee – unless you find a balance transfer card offer that comes with no fees. Otherwise, you can’t altogether avoid fees on the balance transfer.
And that’s assuming your balance transfer goes through. These 0 percent promotional balance transfer offers tend to come with deadlines for you to take advantage of them. So make sure that your offer is still available before you roll over the cash advance.
Otherwise, you might find that all your trouble is for naught, if you get charged your regular interest rate rather than the promotional 0 percent rate, on the balance transfer. The issuer could also decline your balance transfer offer. For instance, it could deem you to be less creditworthy for some reason than when it extended the offer.
See related: What to do when your balance transfer is denied
Watch out for credit score impact
There could also be consequences for your credit score, since you will be utilizing more of your available credit if you take out a cash advance, or ultimately roll it over into a balance transfer offer.
If the rollover is to a new card account, that would have less of an impact since your available credit would also go up. That would apply if you don’t use this new card to rack up additional debt, which would lead to your using more of your available credit.
However, if you apply to multiple new cards to take advantage of balance transfer promotional offers, and there are multiple credit inquiries from different issuers, it might have a negative impact on your credit score.
Jennifer, taking advantage of a 0 percent promotional balance transfer to roll over a cash advance certainly sounds like a good plan, especially if you can find an offer that carries minimum or no fees. Ultimately, whether you will meet your goal of saving on interest charges will depend on how disciplined you are in executing your plan and paying off your transferred balance before the promotional rate period ends.
Otherwise, all your effort might be for naught.