Question about interest

Anonymous · ‎01-25-2017

Sorry if this is a stupid question....

So, maybe I don't understand how interest works. I am not understanding why I got an interest charge in this situation so maybe someone can explain it?

I took a $1,500 cash advance on my USAA Rewards Visa last Thursday, 1/19. This is a fairly new card so I have not used it yet. There are no other charges on this card. My statement cut yesterday and there is a $2.90 interest charge on the $1,500 balance. How am I being charged interest when I have not been given the chance yet to even make a payment? From my past experience, interest is only charged after the payment due date if you have either not paid the balance in full or paid at least the statement balance. This is my first statement on a charge from 6 days ago and my payment is not due until 2/17. Is it different because it's a cash advance? I have never done one before so I have no experience with them. It is not the tiny amount that is bothering me, it's just the fact I was charged at all

As a note, this money was transferred to another USAA account so there was no fee charged for the transfer. USAA does not charge fees for a cash advance transferred to another USAA account. The charged specifically shows as interest.

I appreciate any clarity that can be provided!!

K-in-Boston · ‎01-25-2017

Interest on cash advances usually (always?) starts accruing daily from the moment you do the advance. I'm not aware of any cards that offer a grace period (no interest as long as you pay in full by the due date) on cash advances.

rooeez · ‎01-25-2017

For cash advances, even with no fee, the interest starts accruing as soon as you take it. So depending on where in the cycle you took the cash advance, they start charging you interest on the daily balance.

Anonymous · ‎01-25-2017

Ok, thanks everyone!! That is what I figured but I have not ever done a cash advance before so I had no experience. I am doing a BT on it in the next week anyway so it will be paid off in a few days.

longtimelurker · ‎01-25-2017

@Anonymous wrote:
Ok, thanks everyone!! That is what I figured but I have not ever done a cash advance before so I had no experience. I am doing a BT on it in the next week anyway so it will be paid off in a few days.

OK, then you are ready for the next issue! If you pay the statement in full (via BT or otherwise) you will still owe interest next month. The $2.90 is from the time of advance until the statement cut, you will owe interest from the date of the statement until your payment is credited. So pay as soon as you can.

Also, depending on the card (Barclays doesn't do this, most others do) any new puechases made on the card will have no grace period while there is an outstanding cash advance.

rooeez · ‎01-26-2017

@longtimelurker wrote:

Also, depending on the card (Barclays doesn't do this, most others do) any new puechases made on the card will have no grace period while there is an outstanding cash advance.

I also read in BofA's terms, but I image others do it as well:

"Payments are allocated to posted balances. If your account has balances with different APRs, we will allocate the amount of your payment equal to the Total Minimum Payment Due to the lowest APR balances first. Payment amounts in excess of your Total Minimum Payment Due will be applied to balances with higher APRs before balances with lower APRs."

So refrain from using the BT card for purchases as it makes chipping away at a 0% BT slower, but that is probably self evident. lol