Many credit cards will allow you to get cash using your credit card. This is called a cash advance. You get a cash advance by using the PIN you received with your credit card at an ATM or going into a bank for the cash advance. You can also use this feature by using the cash advance checks that the credit card issuer might send to you. Sounds like a good, flexible way to use your card, right? Well...you might need to give it some thought before you plunk down your card and ask for some cash. Specifically you'll want to understand the APR and any fees that will apply to the cash advance.

The Fee
In most cases you will be charged a fee for taking out a cash advance with your card. This fee can be stated in terms of a flat per-transaction fee or as a percentage of the amount of the cash advance. For example, it may be defined as "3% or $10." This would mean that you would be charged either 3% of the amount of the cash advance or $10, whichever was greater. You should understand how this fee will be charged. Depending on the credit issuer, the cash advance fee may be deducted directly from the cash advance at the time the money is received or it may be posted to your bill as of the day you received the advance.

The APR
Another cost that should be considered as part of a cash advance is the Annual Percentage Rate, or APR, that you will be charged for this type of transaction. You should know what the APR for cash advances is on your particular credit card account. Generally, the APR for cash advances is considerably higher than it is for purchases. The cost of a cash advance may also be higher because there generally is no grace period. Interest may start accruing from the moment the money is withdrawn.

Overdraft Protection
Overdraft protection is a service to help you prevent returned checks and overdrafts on your checking account. Wait a minute, right? We were just talking about credit cards, not checking accounts. In this case, overdraft protection is where your two accounts might meet. Overdraft protection is often offered three different ways: by linking your checking account to a savings account, a credit card or a line of credit. So, for example, if you were to spend more money than you actually had in your checking account, the needed additional funds would come out of one of these other accounts. If your overdraft protection service is linked to your credit card, you should know that a cash advance fee and the cash advance APR will likely be charged to your account for any funds that need to be paid into your checking account to cover your overdraft. So understanding how these services function for both your checking account and your credit card is a must.