Question: I have a couple of checks that my credit card company (Providian) sent me recently and I was wanting to use one of them to finance a $233.00 purchase I’ve just made on eBay.
The first check has these terms:
- 1.99% APR through your statement date in Sept. 2004 – a charge of 3% of the amount of the cash advance
I have another check Providian sent me a couple of weeks earlier that says:
“…Cash this check with NO CASH FEE*…”
But then in the fine print underneath, it says “…If used, this check will be charged to your credit account and finance charges will accrue from the date the check is presented to Providian. Your APR for cash advances will apply. This APR is 23.99% and may vary…”
Obviously, 1.99% + a 3% charge of $233.00 ($7.00) in the first check is a hell of a lot better than the 23.99% rate (if that’s what the rate indeed is) for the second check. I guess my question is about the second check. I don’t understand why they’re saying “Cash this check with no cash fee” but then appear to say something else in the fine print. TIA for any advice.
Answer: You should shred the “convenience checks” and find a reasonable way to finance your purchase! Even an unsecured personal loan from your credit union is likely to be cheaper! What’s so terrible about 1.99% APR through Sept. and a 3% cash advance fee ($7) with the first card? Sounds like pretty cheap money to me.
I could easily pay for the item with cash if I wanted, I just thought I could spread out the payments through Sept. (when the APR apparently goes up to 23.99%) and not pay that much in finance or cash advance charges.
When I first got the card back in Oct., I bought a $423 guitar on eBay and used the card. I just paid it off with my 6th payment of (around) $70. I don’t think Providian even charged me any finance charge for this, must have been some kind of 6-month introductory deal. You’re going to “borrow” the $$ until September, which is 4 months. The 3% cash advance fee turns out to be a MINIMUM 9% APR for that loan period (depends on your repayment schedule), plus the 1.99% listed, for a total MINIMUM of 11% APR, if you pay interest only until September. If you pay off part of the principal over the term, the APR of the cash advance fee goes up…
Also, read your card agreement carefully. They will likely apply your payments to the fees first, the low-cost $$ next, and the high-cost $$ last. If you have any credit balance on the card, you will be paying full interest (23.99%?) on that until you pay off the cash advance.
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