The One Dangerous Credit Card Trap I’ve Always Avoided -- and How You Can, Too

There are different perks you might enjoy as a credit card user. Getting to earn rewards or cash back on your purchases, for example, is a good thing, because that's free money for the things you were already planning to buy.

But not every benefit that comes with your credit card is actually a benefit. Case in point: Your credit card might give you the option to take a cash advance. And you may be tempted to do that when you have a need for money.

But taking a cash advance is something I've always managed to avoid. And I highly recommend that you try to do the same.

The problem with cash advances

Taking a cash advance might seem like a simple extension of using your credit card. But cash advances are highly problematic for a couple of reasons.

First, the interest you're charged on a cash advance may be higher than the general interest rate on your credit card. The result? You're spending a lot more to get access to money.

Plus, cash advances usually don't give you a grace period when it comes to interest accumulating. When you put expenses on a credit card, you get a full billing cycle to pay off your balance before you rack up interest charges. But interest will generally start to accrue from the moment you take a cash advance.

It's for these reasons that I've always made a point to avoid taking a cash advance. But I actively took steps so I wouldn't need to by building an emergency fund over time.

These days, when I need money in a pinch, whether it's for a home repair or a new tire for my car, I don't turn to my credit cards. Instead, I dip into my savings account because that's what that money is there for. And that way, I'm not paying extra to access money when I need it.

A good way to build an emergency fund

The emergency fund I have now took years to build. So I won't pretend that going from $30 in the bank to having a large enough sum to potentially avoid needing a cash advance is easy.

But remember, if you contribute steadily to your savings, then over time, you might end up with a nice sum of money that can bail you out of a jam. And if you want to stay on track with that emergency fund, put the process on autopilot.

Arrange for a portion of each paycheck you receive to land in your savings account every month. It can be $15, $20, $50, or whatever you can swing. Over time, it'll add up.

Unfortunately, a good 63% of Americans don't have enough savings to cover a $500 emergency expense, reports SecureSave. So it's people in that boat who might end up needing to turn to their credit cards for money. But if you build yourself an emergency fund, you won't have to get caught in the trap of paying a fortune's worth of interest when you need help covering a surprise bill.