How Is Credit Card Cash Advance Interest Calculated?

Credit card cash advance interest is usually calculated using a higher rate than the rate applied to purchases and is compounded daily.

Interest is charged from the cash advance date until the balance is paid in full. The interest rate used to calculate cash advance interest may vary depending on the card issuer but is typically higher than the purchase interest rate.

How Is Credit Card Cash Advance Interest Calculated?

To calculate the interest cost of a credit card cash advance, the cardholder should first calculate the daily interest rate by dividing the annual interest rate by 365.

The daily interest rate should then be multiplied by the outstanding cash advance balance, and the answer can be added to the credit to get the total interest cost for the period.

The cardholder should also check the card issuer’s terms and conditions to determine if any additional fees are charged for the cash advance. Cardholders must remember that cash advances are costly and should be avoided whenever possible.

Costly for Cardholder

Cash advances can be incredibly costly if the cardholder does not pay off the balance quickly. Since interest is compounded daily, any outstanding balance will accumulate interest at the high cash advance rate, even if the cardholder makes a minimum payment.

Cardholders should pay off their cash advances immediately to avoid costly interest charges.

Cardholders should also check the terms and conditions of their card to determine when the cash advance interest rate will be applied, as some card issuers may begin charging interest once the cash advance is posted to the account.

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