Cash advance

[Anonymous]

The other day I had to take $200 cash advance at an ATM from Capital One quicksilver.

The APR is 26.75 so I want to pay it off after 3 days. 

Do I have to pay the entire current balance to get that off the books or can I pay the $200 plus fees and they will apply it to that?

[outofcredit]

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@Anonymous wrote:

The other day I had to take $200 cash advance at an ATM from Capital One quicksilver.

The APR is 26.75 so I want to pay it off after 3 days. 

Do I have to pay the entire current balance to get that off the books or can I pay the $200 plus fees and they will apply it to that?

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Several years ago I found out the hard way that once you take a cash advance it stays on the account until you pay the account to zero.  Any payments you make get applied to purchase balances first.  Took me several months to pay the entire account in full and only then did the "extra" interest charge for the cash advance disappear.  Lesson learned.

[Anonymous]

I am confused then because after posting this I did some searches and found the following:

Federal law changes payment allocation
That's about to change. A federal credit card reform law enacted in May 2009 requires that credit card companies must apply your entire payment, minus the required minimum payment amount, to the highest interest rate balance on your card. That requirement takes effect Feb. 22, 2010.

This means that, provided you pay more than the minimum payment, you'll be able to pay off your higher interest rate balances faster, lowering your interest payments and paying off your entire bill faster. For example, transferring a balance to a card with low or zero percent interest introductory rate will make more sense under the new rules because your payments will go to pay off higher rate balances rather than the lower or zero rate balances that they went to in the past.

Here's an example of how the new law will work:

• Say you have a $3,000 balance on your credit card and a $39 minimum payment. That balance includes $1,000 in purchases at a 12 percent interest rate, $1,000 in balance transfers at a 0 percent interest promotion rate and a $1,000 cash advance balance at an 18 percent rate.
• If you make a $500 payment, the first $39 will most likely go toward the zero percent interest balance transfer, leaving that balance at $961.
• The remaining $461 will go toward the $1,000 cash advance balance, leaving that balance at $539.
• None of the payment will be applied to the purchase balance.

[outofcredit]

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@Anonymous wrote:

I am confused then because after posting this I did some searches and found the following:

Federal law changes payment allocation
That's about to change. A federal credit card reform law enacted in May 2009 requires that credit card companies must apply your entire payment, minus the required minimum payment amount, to the highest interest rate balance on your card. That requirement takes effect Feb. 22, 2010.

This means that, provided you pay more than the minimum payment, you'll be able to pay off your higher interest rate balances faster, lowering your interest payments and paying off your entire bill faster. For example, transferring a balance to a card with low or zero percent interest introductory rate will make more sense under the new rules because your payments will go to pay off higher rate balances rather than the lower or zero rate balances that they went to in the past.

Here's an example of how the new law will work:

• Say you have a $3,000 balance on your credit card and a $39 minimum payment. That balance includes $1,000 in purchases at a 12 percent interest rate, $1,000 in balance transfers at a 0 percent interest promotion rate and a $1,000 cash advance balance at an 18 percent rate.
• If you make a $500 payment, the first $39 will most likely go toward the zero percent interest balance transfer, leaving that balance at $961.
• The remaining $461 will go toward the $1,000 cash advance balance, leaving that balance at $539.
• None of the payment will be applied to the purchase balance.

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As I said, what happened to me was several years ago and may have pre-dated the current law.  Or, it may be that I was interpreting the extra $5 per month interest on cash advance without a reduction in the balance of the cash advance incorrectly.  Something else also may have been going on such as loss of grace period etc.  Anyway, my cash advance balance never zeroed out until I paid the entire card balance to zero. Things most certainly have probably changed since then. Sorry for the out-dated information. Hopefully, you will have a better experience with cash advances than I did.

[Anonymous]

thanks for taking time to try to help me.  I fear that you are right however and I will be paying for that cash advance til it reaches zero.  I hope others chime in. 

[iv]

You would need to make a payment equal to the minimum plus the cash advance amount and interest to remove all balances revolving at the cash advance APR.

The amount of the minimum payment would be credited to the LOWEST APR balance.

Any amount above that would be credited to the HIGHEST APR balance.

(Of course, paying the account to zero is the only way to stop paying ANY interest, and regain your grace period...)

[Anonymous]

If a person has the money to pay the account to zero, I wonder if it makes sense to just go a bit further and pay it to a negative number.  The current balance may well not include the current month's interest.  I have myself always done the negative balance in the few times I was paying interest on a credit card.  Curious what you all think.

[iv]

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@Anonymous wrote:

If a person has the money to pay the account to zero, I wonder if it makes sense to just go a bit further and pay it to a negative number.  The current balance may well not include the current month's interest.  I have myself always done the negative balance in the few times I was paying interest on a credit card.  Curious what you all think.

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Yup. "Overpaying" slightly to cover accumulated monthly interest will ensure the account is PTZ without any trailing interest, and reclaim the grace period potentially a month earlier than otherwise.

[HeavenOhio]

Capital One will allow you to pay up to 10% over your current balance. So definitely pay to a negative amount as soon as possible, and don't use the card until your grace period is reset.

Cash advances are something that definitely shouldn't be taken casually. Of course, if you're stuck in a bizarre situation that offers no other option, you'll need to do it. The least confusing way to do it is to use a card that doesn't have a balance to begin with and can be left alone until the grace period is reset.

[Anonymous]

I did a cash advance twice. Once on purpose with NFCU and once by accident not thinking when I paid for a purchase overseas with a money gram. Oops. Anyway, both had to be paid off in full to remove the cash advance and the interested started accruing immediately.