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Does cash advance get paid back first?

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Anonymous
Not applicable

Does cash advance get paid back first?

 

Let's say you use a credit card to make, say, $500 in purchases. Then you take a $100 cash advance from the card, so now you owe $600, and interest is being charged on the $100. A couple days later, before statement cuts, you go and make a $100 payment to the card. When the statement eventually cuts a couple weeks later you then pay the remaining balance in full before the due date.

 

What happens? 

 

 Three possibilities come to mind:

1. The $100 wipes out the cash advance and stops any further interest from accruing

2. The $100 wipes out the cash advance, but a few days interset accumulated, and the interest on that continues compounding daily

3. The $100 is applied to the $500 in general purchases, and you continue to pay interest on $100

 

I believe the CARD act requires the $100 to be used to the "highest" interest rate item, which should make 3 illegal--but I'm not 100% clear on whether it applies in this case, since it's not a "higher" rate, just an "immediate" rate. I'm also not clear if the interest on the $100 would start compounding daily so that you would actually have to pay slightly more than $100 to stop interest on the interest from compounding.

 

Message 1 of 5
4 REPLIES 4
Dalmus
Valued Contributor

Re: Does cash advance get paid back first?

Are we assuming that you started with a $0 balance on the card?

 

If so, all $100 of your payment (made before statement closing date) would go towards the highest-interest balance.  However, since most cards begin accruing interest immediately on a cash advance, you would have to pay $100 + whatever interest was accrued in order to wipe out that advance.

NFCU MR: $25K | Venture: $21K | Amex ED: $18K | NFCU CR: $18K | Amex BCE: $15K | IT #1: $17.5K | PNC Core: $15K | PPMC:  $12K | Wells Fargo: $11K | Savor: 12K | Cap1 QS: $8.5K | Barclays Rewards: $7.75K | IT #2: $7.3K | MLife: $9.5K | Sportsman's Guide: $8.7K | PenFed PR: $5.5K | Elan Plat: $2.3K | TRV: $3.6K | BotW: $3K


Current FICO 8 Scores: EQ: 828| TU: 805 | EX: 814


Message 2 of 5
Anonymous
Not applicable

Re: Does cash advance get paid back first?

IDK which card it is you're talking about for this, as some have different policies. But I know from experience that whatever you pay over the minumum payment get sapplied towards that CA/higher interest amount. So if your minumum payment was $25, you'd need to pay $125. Plus  whatever accrued interest was applied. This is why I do not like advances, you almost never know the true amount to pay and when. lol

I remeber one time I could never get the accnt paid to zero, so i finally sent them $5 over and got a check back for 90 some odd cents. 

Message 3 of 5
Anonymous
Not applicable

Re: Does cash advance get paid back first?

So in this particular case it was my BoA travel rewards card. It is set up as an overdraft on my BoA checking and an unexpected charge caused it to draw from the card, which I believe is treated as a cash advance.

The sad story:I drew cash out of a foreign ATM using my BoA DEBIT card, then later moved the remaining cash to my Merrill Edge account. Then a few days after that the foreign ATM network charged a $10 fee to my checking account, which I did not expect, and there was no longer any cash there. So it pulled $100 cash to the checking account via overdraft ($100 is the minimum overdraft transfer I believe) from the card, and charged me an overdraft fee. That left me with a $100 cash advance.

Good news is the overdraft did work and saved me from a bigger NSF fee, I got dinged five bucks plus a day's interest on $100.

Soon as I noticed it I moved money back from Merrill Edge and paid off the credit card balance 100% including both the cash advance and the outstanding balance. I wasn't sure if any other way would stop further interest charges so I just paid it down to $0.

Not that it matters, just curious if I could have paid less off to stop the interest. The real lesson I learned is BoA sucks for foreign ATMs and I won't use it again. No such fee was charged for a withdrawal from the same ATM via my BECU debit card.
Message 4 of 5
Dalmus
Valued Contributor

Re: Does cash advance get paid back first?

Also why I've learned to always keep a bit of a cushion in my checking accounts JUST in case something weird like that happens.

 

But you're right... even though you had to pay that little bit of a fee an interest, it saved you from a derog on Chex Systems or similar!

NFCU MR: $25K | Venture: $21K | Amex ED: $18K | NFCU CR: $18K | Amex BCE: $15K | IT #1: $17.5K | PNC Core: $15K | PPMC:  $12K | Wells Fargo: $11K | Savor: 12K | Cap1 QS: $8.5K | Barclays Rewards: $7.75K | IT #2: $7.3K | MLife: $9.5K | Sportsman's Guide: $8.7K | PenFed PR: $5.5K | Elan Plat: $2.3K | TRV: $3.6K | BotW: $3K


Current FICO 8 Scores: EQ: 828| TU: 805 | EX: 814


Message 5 of 5
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