A cash advance is generally defined as a service that allows you to acquire money
either through an ATM or through a banks actual over-the-counter teller. Its different from a normal cash withdrawal in that the money received is not actually possessed by the customer. They both incur a minor debt for the customer.
There are two types of cash advance services; one refers to a specific credit card function while the other variety is an independent payday loan. They are differentiated from each other by the fact that the first service is provided solely through a persons home bank while the second is usually offered by many independent loaning firms.
A cash advance through a credit card allows cardholders to withdraw cash through any accredited financial institution. The amount of money the customer is allowed to get is kept in check by a definite figure. Usually this number is the persons credit limit; however there are some instances where banks will allow their customers to set a different cutoff point. Transactions like this usually have a corresponding fee attached to them, in an effort to offset the interest rate normally levied on credit card purchases.
The payday loan version of a cash advance is an entirely different thing. This is a service provided by third-party companies separate from your actual bank. They process extremely short-term loans with an average maturity date of one to four weeks. The payday loan got its name from the understanding that the payment for the borrowed cash will be posted on the debtors next salary.
This type of cash advance has become very popular in recent times. These offer flexibility and liquid assets for clients who need money quick. They provide near-instantaneous loan application processing and approval. Requests are typically approved or rejected the same day they are submitted.
These professional loaning firms make money on your cash advance through adjusted interest rates. Since these debts have such a brief maturity period, the use of an effective annual rate (EAR) is usually preferred over an annual percentage rate (APR). An EAR takes compounding into account and thus will generate more profit for the firm than its APR counterpart.