Beware of cash advances

A few months ago, I stopped by a branch of my local bank and used the ATM to get $20. Unfortunately, instead of my ATM card, I accidentally used my credit card, which is issued by the same bank and has the same PIN (which is probably a bad idea, I know). The screen menu looked slightly different, but I thought it was just that this particular ATM had a different menu than usual. It wasn't until later that I realized I had gotten a cash advance on my credit card rather than an ATM withdrawal from my checking account.

I checked my credit card account online a few days later, and not only did the $20 cash advance show up, there was also a $10 transaction fee. Yargh. Then the next month, there was an additional 25 cent finance charge. I had paid the credit card balance off in full, so I wasn't sure why there was this additional charge. According to the statement, however, the "average daily balance" on the cash advance was $12.30. Because it had not been paid off (according to how they calculate these things), I had to pay an extra quarter.

So the next month, I intentionally paid an extra fifty bucks or so to make sure that the full cash advance amount would be wiped out. No such luck. This time I was charged another $1.00. Somehow the "average daily balance" had gone up to $13.87, even though my payment should have eliminated it.

Finally, on this month's statement, it shows that the cash advance has been paid off. So it cost me $31.25 to have a $20.00 cash advance, just because I accidentally used the wrong card. How annoying.

Lessons? Be careful what card you use. And more significantly, this experience made me think about folks who get trapped by usurious credit card debt. Evidently my credit card has a 12.99% APR for regular credit card purchases, but 23.99% on cash advances, not including fees. I'm not a math major, so forgive me if I'm calculating this wrong, but it seems like the net interest rate to use/borrow that twenty bucks was 56.25%. That's crazy.

Anyway, I applaud local churches that have financial management classes and groups to help us avoid some of these pitfalls. Consumer culture is challenging enough to navigate these days, even for those of us who try to practice good stewardship and disciplines of simplicity and frugality. Oh, that the spirit of Mammon would be defeated by the spirit of Jubilee!