Final answer:
A cash advance against a bankcard is a loan where the cardholder borrows against their credit limit and must repay the principal and additional fees, which usually include a high interest rate. The interest for cash advances typically starts accruing immediately, making them costly options.
Step-by-step explanation:
A cash advance against a bankcard is a type of loan where the cardholder borrows cash against their available credit limit. The borrower is then obliged to repay the amount withdrawn, known as the principal, plus any additional charges. These charges usually include a higher interest rate compared to standard purchases and may also come with additional fees.
The interest on a cash advance is often charged from the day the cash is withdrawn, unlike purchases that might have a grace period. This makes cash advances more expensive than regular credit card purchases. As such, it is essential for individuals to consider the costs before taking a cash advance, and to also explore other less costly borrowing options. Budgeting and responsible use of credit are critical in managing personal finances and avoiding unnecessary debt accumulation.
A cash advance against a bankcard is a form of short-term borrowing wherein the customer can withdraw cash from an ATM or bank using their credit card. The customer must repay the principal advance amount along with an additional fee or interest charged by the bank. This fee is typically a percentage of the total amount borrowed and is known as the finance charge or cash advance fee.
For example, if a customer takes a cash advance of $100 with a cash advance fee of 5%, they would need to repay the $100 principal amount plus an additional $5 as the finance charge.