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I recently went to a conference in Boston with 3 other students from my university. To make things simpler with the reimbursement process (or so I thought), I paid for everything (airfare, meals, etc. for all of us) on my credit card with a $2,000 limit. There was a hiccup in the reimbursement process, and so it's coming a little late - my bill is due tomorrow, on the 24th.

Fortunately, I have a great mother who lent me what I need to finish paying off the card - $600. I just made the payment today, but I'm curious: now that my card is fully paid off, can I take out a cash advance of $600 to pay her back immediately? I would, of course, make this payment when my reimbursement finally goes through.

I'm wondering if there are any implications to my credit score if I make a payment of $600 to pay off the card, then immediately withdraw that as a cash advance to be paid back on the next payment due date. It seems like card companies would flag that as bad behavior - "here's the $600 that I owe you Mr. Card Company. Oh wait... can I have that back? I need to pay rent... I'll get you back in 30 days."

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    I don't know how it would affect credit score, but IIRC most credit cards charge high interest rates on cash advances, and from the day you take the advance, not your next payment due date. – jamesqf Dec 23 '16 at 19:23
  • @jamesqf I should probably brush up on my card's policy on that... – Chris Cirefice Dec 23 '16 at 19:24
  • Most cash advances have a fee; spending 3% off the top for a cash advance (not counting ongoing interest) makes it utilitarian for true liquidity crunches but not much else. – user662852 Dec 23 '16 at 19:38
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The timing isn't the issue. The problem as comments stated is that a 'cash advance' has no grace period. It also comes with a fee, typically an immediate 2-5% of the borrowed amount. The total cost can be 5-7% for just that 30 day float.

There are times these cards will send you checks to borrow cash interest free, but still a 2% initial one time cost. And, depending on what else is happening, that may make financial sense, especially if that zero interest offer is a year or more. In your case, the short term need makes this a far worse deal.

(And there's a part of me that wants to say that in a rare event, a total cost of say $30 to borrow this $600, is not a major issue. From a 'feeling' standpoint, clearing the debt to mom might be better than making her wait. Other members might rightly suggest that such borrowing is a bigger sign of trouble, but that's making a logistical leap that might not be right in your case.)

  • I certainly agree with all of your statements, and am going to look at my card usage criteria tomorrow. I never intended to make this cash withdrawal - my mother is happy to wait a week or two to get the money back, and I can pay her by then. I was just curious as to what CC companies would reflect on such credit-borrowing behavior. In any case, I am financially responsible, it just so happened that my university is taking longer to reimburse me than I had thought (which I guess, in my circumstance, deems me financially irresponsible!). This is good advice, though, thank you for your answer! – Chris Cirefice Dec 24 '16 at 4:40
  • The card issuer will not have any reaction. The question is whether the credit scoring agencies will see the utilization as high or just normal transactions. Even if they do, this will all go away in another billing cycle or two, once the card is paid in full. The key thing is to not miss a payment and to have low utilization if/when you are applying for new lines of credit. – JoeTaxpayer Dec 24 '16 at 11:33
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Your idea would not work for the reasons others have mentioned: no grace period on cash advances, possible up front fees, and possible higher APR than purchases. In this scenario you'd be better off not paying off the $600 and leaving it under the purchase APR, which will be the same or lower than the cash advance APR.

To accomplish your goal you'd have to be creative. You pay off your card in full. Then you buy something worth at least $600 for someone else and convince that person to pay you cash for it, which you in turn give back to your mom. This way you would get the grace period for another 30 days. I'm not sure how you would go about doing this though, and I definitely wouldn't recommend doing it with a stranger. (Best Buy would probably kick you out of the store if you stake out the cashier waiting for someone to buy a TV with cash...) Maybe you could just pay $600 worth of your Mom's bills for her on your credit card.

  • +1 for the creativity, though that sounds like a lot more trouble and mental burden than it is worth! Though that is an interesting point - making purchases on behalf of other people and getting cash in return - not an obviously lucrative measure, but something to think about when in dire straits, if circumstances permit it. – Chris Cirefice Dec 24 '16 at 4:43
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    +1 - If mom has any regular bills she charges, this may very well be a simple solution. – JoeTaxpayer Dec 24 '16 at 11:34

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