Managing your personal finances, especially in the early twenties, is a challenge that few people overcome with any certainty.
The sad reality is that while schools teach mathematics and cover complicated algebra, those same schools fail to teach anything about balancing a cheque book, managing financial accounts using Quicken or Money, and nothing about sound financial practices to become financially wealthy either.
Many twenty-somethings become “consumers” who consume debt, often irrationally, rather than learning to be astute managers of their own financial destiny.
Are Women Better Personal Money Managers Than Men?
Credit comparison experts TotallyMoney.com did some research and found that there is a disturbing trend of men making less savvy personal finance decisions. There is also an infographic which breaks down their findings.
Taking money out of an ATM using a credit card to provide a temporary cash advance is something that 18% of women do, but 23% of men also take cash advances this way. The fees and interest rates for the majority of credit cards that offer cash advances are extremely high on a short-term basis. Almost any other form of credit is cheaper, from an overdraft to a personal loan.
Lack of Financial Education
When looking at the state of financial education, the results are not encouraging. Men are 1.4 times more likely to believe that taking out a credit card cash advance is less expensive that making a retail purchase from a store or online.
Clearly, more men than women fail to understand that a cash advance is not the same as a cash withdrawal from a checking account or that interest is chargeable from the day the cash advance is taken rather than only accruing interest if the bill isn’t cleared in full the next month.
Getting Smarter With Age
Information about cash advances indicates that people who take cash advances often believe that they’re cheaper than withdrawing cash using a debit card or that cash advances are less expensive than credit card purchases. It appears that these people get smarter with age.
The group that seems to make the worst financial decisions centred on cash advances is the 18-24 year olds. People in the early stages of working with financial products, in many ways this is not surprising. Both the 25-34 and 35-44 age groups fair better than their younger counterparts, but approximately the same with each other.
The big leap forward with cash advances comes from the 45-54 and 55+ age groups which show an improved understanding of the true costs of cash advances versus alternatives, and habitually take out cash advances much less frequently.
Cash Advance Fees On The Rise
It has probably escaped the notice of the many people who wouldn’t think of taking a cash advance, and most certainly with those people who do, but cash advance fees have been going up lately.
Since 2010, cash advance fees have gone up by 53 pence on average. The average fee for taking a cash advance – even before factoring in interest costs – is now £3.34 each time. As such, financial naivety continues to get more costly for those not in the know or who choose ignorance over experience.
It Pays To Compare
Comparison shopping isn’t only for online shopping, it’s also for financial products too. Financial comparison web sites help to compare different types of financial products to determine which ones suit their particular needs best.
If travelling frequently, then a card that offers minimal or low international withdrawal fees might be ideal. If taking frequent or infrequent cash advances, but wish to do so with the lowest costs in the market, then a good financial comparison site can help with this requirement too.
One of the best credit cards for low cost cash advances currently is the Halifax Clarity Card. This offers some of the best benefits of any credit card. This card charges no cash withdrawal fees at all, including from any ATM in the world (there may be a local ATM fee for the country), and no annual charge.
Inexpensive Credit Myth
In most cases, credit cards are a more expensive method to get hands on the cash. However, working professionals still sometimes find that cash advances have their place to offer cash in a hurry for just a few pounds if repaid quickly.
In the case of a cash advance using a product like the Halifax Clarify Card, then cash advances can represent cheap credit if the interest rate is not excessive because there is no initial cash advance fee.
Classic Credit Card Mistakes
As one receives an education in using a credit card, it’s possible that many of us go through a learning curve that can get expensive over time. Sometimes this is through no fault of your own whereas other times it has to be put down to learning from experience.
This instructive article from Investopedia.com is a useful reminder of some basics to pay attention to with credit card use.
Learning From Personal Experience
In my case, I once bought a Hi-Fi from an electrical company that had a retail chain of stores. Six months after the interest-free period, I received a bill. I walked into my local bank and asked the teller whether I would be able to pay this bill on their branded credit card as I had both a checking account and a credit card with the same bank at the time.
I also confirmed that the transaction would be treated as a purchase and not a cash advance; the latter I knew would incur a fee and interest until it was repaid. I was told it would be a purchase transaction.
Six weeks later, I received a bill for my credit card where the bill that I’d paid off at the electrical store was treated as a cash advance, with fees and interest tacked on. At which point I complained to the bank, NatWest.
The bank said that the credit card bearing their brand was independent of the bank itself and so they weren’t responsible for wrong advice given within the branch. Lovely. Sometimes even being studious doesn’t pay off. In response, I closed the checking account that I’d had with them for over a decade. I also paid off the credit card and shut that account too.
Sometimes it pays to comparison shop and opt for financial companies that truly value your business.