The Credit Card Cash Advance:
A Productive Tool in Disguise

A credit card cash advance has a bad reputation. We hear that it is the instant way to get into debt. You receive these offers from credit card companies every day and shred them. We too followed the crowd.

How it can be misused.

• Doodads. Don't use it if it's just to buy doodads like jewelry and large screen TVs. They don't produce anything for you and this activity can drive you deeper into consumer debt. It's important to be able to distinguish buying assets vs liabilities.
• The clock is ticking. A credit card cash advance shouldn't be used to avoid paying off debt. If offered, a promotional APR is only for a limited time. If you don't pay back the funds before the time limit, the higher, original APR kicks back in.
• Charges on charges. There is a finance charge just for the cash advance. Finance charges are one of the eroding factors of money. They can be between 1%-4%. If you do not plan on paying back this advance, then you are just compiling debt.
• Increased debt to credit ratio. As the balance on this credit card increases, your debt to credit ratio increases. For example, let's say that your current debt is $2500 and the credit card limit is $5000. Your credit to debt ratio is 50% (2500/5000). If you take out a $5000 cash advance on a new credit card with a $5000 credit limit, your debt to credit ratio increases to 75%. An increased ratio can lower your fico score.

OK, a credit card cash advance can be used in a destructive manner.

But we never thought,...

...was it possible that we were throwing away opportunities? Was it possible that this could help pay off credit card debt? Was it possible that this is a productive tool in disguise?

It was at a Rich Dad Poor Dad seminar where we learned how the rich leverage this tool.

Hidden Potential

• Fast cash. You have immediate use of funds. There is no waiting period. We learned that the rich use this tool when capital is quickly needed for an opportunity.
• You qualify. If your request is within the credit card cash advance limit, then you qualify. There is not credit check. How great is this financial freedom resource in an emergency?
• Leverage. You have the opportunity to leverage other people's money (OPM) while keeping yours in tact. Imagining borrowing this money at a low rate to invest it in an investment at a higher rate.
• Sidestep credit score impacts. Unlike credit card balance transfers, cash advances themselves won't affect your credit score unless your credit score is pulled and your debt to credit ratio is high. (Keep it under 30%).

While the credit card cash advance has earned its bad reputation, when used wisely, it can be used to achieve financial freedom. You can use the money for investments like a down payment on an investment property, to pay off credit card debt, to deepen your personal growth, or to use in an emergency.

The credit card cash advance is another tool in the toolbox to help one down the path to financial freedom when used in a productive manner.