Gather Little by Little

It is one thing to be put on The Rack for no fault of your own, but do not go there voluntarily!

I receive credit card offers for cash advances in the mail on a regular basis. The offers are almost always terrible – interest rates in excess of 20% and fees on top of the interest! I recently was sent an offer with a 23% APR and a fee of 8%, what a deal! The most significant aspect of the credit card cash advance offers is that they do not seem to be meant for a specific expense. The cash advance is simply that – the bank hands you money and you hand a whole lot back. These types of offers are not for a car or home loan, there is no asset or collateral attached to the cash advances, the money is just “emergency” or “fun” money at usurious interest rates.

When I get cash advance offers, they go immediately to the shredder or the round file. I cannot imagine the circumstances under which I would use one of those cash advance “convenience checks”. However, I got to thinking about this the other day: the banks and credit card companies would not send these offers in the mail if there were not “fish” who take advantage from time to time. There really must be people with financial problems that are so bad that they cannot be solved without agreeing to pay 18% interest. I have several questions:

• Do these folks not have any friends, neighbors, relatives or churches who can help to meet the need? For the person who gets the cash advance with double digit interest, have they considered walking to work? Moving in with a family member? Getting a couple part-time jobs? Desperate times call for desperate measures. In my book, a cash advance like this is a “desperate measure” or am I an exception?
• Are some people choosing between government assistance or a 19% interest rate – and picking the interest rate? I am no fan of big government and the nanny state, but if the assistance is there and the person truly has a great need, I sure would not blame them for getting government help.
• How many people actually pay off a $3,000 cash advance at 20% plus fees? At $100 per month, it will take nearly three and a half years for a total repayment amount of well over $4,000. Do you really need the money that bad? And if you take the $3,000 now, is there any guarantee that this is the only time that you need a cash advance for the next four years?
• Do credit card companies consider the person who will take such a loan, to be a worthy credit risk?
• If a person is so desperate one month that they are forced to take a cash advance, under what circumstances are they in better financial shape during the following month? It seems like a cash advance would nearly guarantee that you are stuck in a cycle of debt that will eventually result in financial drowning.

I am very interested in finding out more about the people who borrow money at these rates. If you happen to be one of these folks, I would love to hear your story whether it is a success story or not. I will keep everything that you share, confidential and if I decide to share your situation on the blog, I will address your case as compassionately as possible. Maybe a cash advance like this is a good move in some situations. I cannot think of one at the moment, but that does not mean that such situations do not exist. If you have ever taken a double-digit interest rate cash advance at some point in your life, please email me glblstew at gmail.com.

If  you are about to take out one of these loans, please contact me so that I can try to talk you out of it and possibly “lend” some advice on how to avoid this path.

shoshanah