Cash Advances Interview with WRKO Radio Boston
CreditCards.com Senior Industry Analyst Matt Schulz spoke on Wednesday, June 3, 2015, with Barry Armstrong of WRKO Radio Boston about the results of the June 2015 Cash Advances survey. The interview and transcript are below.
Barry Armstrong: Let’s go to our guest Matt Schulz from CreditCards.com, which is actually a subsidiary of Bankrate.com. Matt knows a lot about credit cards, he knows a lot about the hazards associated with cash advances. Hi Matt, how are you?
Matt Schulz: I’m great, thanks for having me.
Armstrong: Credit card cash advances – good idea, bad idea?
Schulz: Well, they can be the best of a bunch of really bad options when times get tough, but they’re also definitely something to avoid under normal circumstances.
Armstrong: How do they work? I’ve never used one.
Schulz: Generally the most common way is to just use your credit card to pull cash out of an ATM, but there’s also those convenience checks that we used to have our mailbox flooded with-
Armstrong: Sure, I still get those.
Schulz: -you don’t seem them quite as much anymore.
Armstrong: No, I get those.
Schulz: And those are treated as cash advances as well. That means they are subjected to a much higher interest rate, there are some difference rules in terms of when interest applies, and also just some upfront fees. So all in all not something you want to deal with unless things are kind of an emergency.
Armstrong: Well, let me give you an example of where I saw one being used. I was at Walmart on Saturday morning. Family in front of us goes through and they buy a bunch of family type items and at the end of the purchase the consumer ahead of me said, “Can I get a cash advance?” And she said, “Yes, you can. Our maximum is $100.” So what would the terms of that transaction be?
Schulz: The most interesting aspect of that is that interest starts to accrue on that immediately unlike with a regular credit card purchase where you have that grace period. So that makes those sky high APRs that come with these cash advances an even dicier proposition.
Armstrong: So 24%, could be as high as 36% from what I see in your article.
Schulz: Exactly. The highest one we saw was with First Premier Bank card, which was 36%, which is really high.
Armstrong: But you also write that the fee structure is 5%. So this guy got $50 so does that mean that he was charged an additional $2.50 on top of the 24%?
Schulz: He was actually probably charged about $10 because the typical fee structure is 5% or $10, whichever is greater.
Armstrong: Oh, that’s terrible.
Schulz: So yeah, again – something that you definitely need to look at the details of before you jump in to.
Armstrong: Holy smokes, I had no idea. Hey Chuck, did you know this?
Chuck: Unfortunately, yes. I had a couple of experiences with needing cash advances a couple of times.
Armstrong: So you learned? The hard way?
Chuck: It was not a fun experience.
Armstrong: That’s outrageous. And this is all legal, Matt?
Schulz: Yeah, it’s legal under the terms of the Credit Card Act and what’s interesting is that it’s still cheaper than things like a payday loan or a title loan. More convenient than a personal loan. And sometimes it can even be cheaper than overdrafting your checking account. You just need to be really sure you know what you’re getting into.
Armstrong: No kidding, this is outrageous. Absolutely outrageous. Well, thank you. Matt, I appreciate your time, I appreciate you joining us. Thank you very much.
Schulz: Thank you.
Armstrong: Matt Schulz, Bankrate.com. Holy smokes, here’s the message – keep a little cash in the house. Do not get a cash advance on your credit card. It’s really pretty simple.
Chuck: It is cheaper than a payday loan in a lot of cases, though.
Armstrong: Don’t put yourself in the position-
Chuck: Well, in a perfect world no one does, but unfortunately you have a number of people that are forced to use – not forced to but feel that they are forced to use these types of tools just to make ends meet.
Armstrong: You sound like my youngest son and that’s a conversation for another day.