Travel tip: Why a cash advance is a bad idea when you’re on vacation

You’re on vacation and getting ready to use your credit card for a cash advance.

Stop right there and ask yourself whether it’s an emergency that can be resolved another way.

That’s because the fees and interest rates charged on such advances can add up, said Matt Schulz, senior industry analyst at CreditCards.com, an online marketplace for credit cards that on Wednesday release a report released about cash advance cards.

Many credit cards used for purchases can incur a foreign transaction fee, which can add 5% or more to your purchase. You can find a list of those fees at CreditCard’s list.

Not every transaction can be handled with a credit card, and if you’re out of cash and don’t, for some reason, have a debit card on you, you may be tempted to use the credit card’s cash advance feature.

“A cash advance is basically just using your credit card to withdraw money from an ATM,” Schulz said. “That’s the most typical example of when someone would do a cash advance.”

But, he added, “That comes with fees, and it comes with a high interest rate, and those two things generally make it a pretty bad choice for somebody under normal circumstances.”

How high? Some cash advances charge 23.5% interest—“8 ½% higher than the average credit card, which is 15%,” Schulz said, “a big difference.” The report said one bank charged 36% on advances.

The other catch: Interest begins accruing immediately, unlike a regular credit card purchase in which you have a grace period, depending on the terms of the card. Because you won’t be home, you may not think to pay it off immediately.

All in all, a cash advance isn’t your best financial move unless circumstances warrant. We often urge people to carry several financial tools when traveling, but that ought to be the last one you take out of that tool chest.

MORE

Travel tip: Remove batteries before storing electronics

Cruise lines’ fine print limits their liability, your right to sue

Bumped from online service’s booking? It’s probably airline’s doings

Follow us on Twitter at @latimestravel