Credit cards are a major part of our lives when it comes to managing personal finance and provide an ease of use on the go as well as provide a timely credit line for emergency uses or big purchases. Yet, cardholders frequently want to use their credit limits 신용카드 현금화 for money, a movement recognized as “cashing credits cards.” It is widespread and socially accepted in some countries, while in others it may be very risky. This guide will mainly introduce how to safely cash with a credit card and considering that it is most often seen in South Korea, we would like to give Korean Credit Card Cashing a special spotlight.
What is Credit Card Cashing?
Credit card cashing is taking your credit card and either using it to withdraw cash or using a service to convert your credit limit 소액결제 상품권 매입 into money. While it seems like self-explanatory advice, there are legal and illegal ways to do this. Most credit card companies will allow cash advances, but the fees and interest rates are typically exorbitant. Others, on the other hand, will try different tactics like working with middlemen to transform their lines of credit into cash in order to avoid fees—sometimes at a greater exposure instead.
Credit card cashing, which is prevalent in South Korea, has its specifics and related consequences. The techniques are also broad, including everything from conventional banking channels to those that fit somewhere in the grey area between legitimate and not so much.
Why Cashing Out Credit Cards?
There are many reasons people want to cash out their credit cards
- Many people do not have the luxury to wait until their next payday and the credit card is a fast haul recourse that can assist them in such emergency situations.
- Using credit to make payments on other debts (eg, using a credit card to pay off another, lower interest debt).
- Investment Opportunities — Sometimes certain people cash out their cards, because they use that freed up money to invest in opportunities that will get them a return more than the fees they would have pay associated with it from cashing.
So it’s important to weigh the risks and rewards accordingly. Here are some useful ways to capitalise credit cards without taking on high costs and risks.
1. Originally, cash advances were the norm.
Perhaps the simplest way to get cash from your credit card is through a cash advance. This is a feature that pretty much every major credit card offers, and allows you to access cash directly from your card’s line of credit via ATMs or by visiting a bank in person. Here’s how to do it:
Steps:
- Make sure your card allows cash transfer. Not all cards offer this.
- Either hit an ATM that accepts your card or take it to the bank.
- Insert the card and put in PIN to process as if it is a cash withdrawal by card.
- Take out is more advisable, up to the cash advance limit on your card ( which is always less than your maximum credit limit).
Pros:
- Access to cash quickly, in many cases immediately.
- Widely available and legal.
Cons:
- High interest rates that start accruing immediately.
- Fees for transactions, typically 2% to 5% of the amount of cash withdrawn.
2. What is a Balance Transfer to a Checking Account
You could also complete a balance transfer from a credit card to your checking or savings account. Sometimes when you need more money, and your card has a low or zero percent introductory rate on balance transfers, this is how people do it. Please be aware that this can take a few business days still.
Steps:
- See if your credit card has any special balance transfer offers
- Initiate a transfer to your bank account through the online portal for that card.
- Wait for the transfer to process.
Pros:
- Fees are less if you qualify for a balance transfer offer.
- Typically costs less than a cash advance.
Cons:
- Not all credit cards allow transfers to personal accounts.
- The process can take several days.
3. Korean Credit Card Cashing Services
In South Korea, there’s a unique practice referred to as “Credit Card Cashing” which has become a widespread phenomenon. Essentially, it involves using a third-party service to “cash” your credit card in exchange for a commission.
These services typically work by creating a fake transaction with a business that processes credit card payments, after which they provide the user with cash, minus a fee. While this method has become prevalent in South Korea, it occupies a legal grey area and is generally discouraged by the government and financial authorities.
Steps:
- Contact a credit card cashing service. These can be found online or through word of mouth.
- Provide your credit card information to the service, which then processes a faux sale.
- The service will transfer the agreed-upon cash to your account, minus their commission, which can range from 5% to 15%.
Pros:
- Quick and easy access to cash.
- Can bypass the traditional cash advance fees imposed by banks.
Cons:
- Questionable legality in many cases, depending on local laws.
- High fees, sometimes even higher than cash advance fees.
- Potential long-term consequences for engaging in these practices.
While some people in South Korea use these services due to their convenience, they are considered illegal in most countries and come with significant risks, including fines or penalties from your credit card issuer.
4. Peer-to-Peer Loans
Some individuals use peer-to-peer (P2P) lending platforms to convert their credit limit into cash. By applying for a loan on a P2P site, you can essentially borrow against your future ability to repay, often at rates lower than a traditional cash advance.
Steps:
- Find a reputable P2P lending platform.
- Apply for a loan, specifying the amount you need.
- Use your credit card to make repayments over time.
Pros:
- Lower interest rates than a traditional cash advance.
- Flexible repayment terms.
Cons:
- May require a good credit score for approval.
- The application process can take several days.
Risks and Considerations
Regardless of the method you choose, it’s important to be aware of the risks involved in cashing credit cards:
- High Interest Rates: Most credit card cashing methods, especially cash advances, come with much higher interest rates than standard purchases.
- Debt Trap: By cashing out your credit card, you risk accumulating significant debt that can be difficult to repay.
- Credit Score Impact: Overutilization of your credit limit can negatively affect your credit score, making it harder to obtain future credit.
Conclusion
Cashing in credit cards can be a very advantageous financial play if carried out carefully, however it pays to be careful. The older (and safer) methods usually come with higher fees, while the newer services like Korean Credit Card Cashing can be a quick way to get your hands on some funds but may also leave you in limbo. Check the legal and financial ramifications before deciding based on one of those options, and ensure you can repay borrowed cash swiftly in order to avoid any long-term debt troubles.
Knowing about the choices available as well as their respective risks will allow you to decide how and when wisely and safely you can convert your credit card into cash.
