What Could Legally Happen if Cash Advances Are Not Paid?

A cash advance is a type of loan typically provided by credit card companies to customers in which the company provides cash to the customer through an automatic teller machine or similar system. Like any other kind of loan, failing to repay cash advance can lead to significant legal troubles. Consult an attorney if you have taken out a cash advance loan and need specific information about the potential consequences in your state.

Interest and Fees

When you use a credit card to make a purchase, your credit card issuer typically charges you interest on that purchase at a certain percent per year, known as APR. If you use your card to take out a cash advance, these typically have APRs associated with them that are significantly higher than the standard purchase APR, according to Bankrate.com. Further, unlike the interest rates on purchases, cash advance interest begins accruing immediately once you take the money, and may also be accompanied by a fee equal to a small percentage of the amount you withdrew, typically between 2 and 4 percent.

Collections

If you fail to pay back a cash advance loan by failing to make your regular credit card bill payments, your credit card company can refer or sell the unpaid debts to a collections agency. A collections agency can then try to convince you to repay the loan to them by calling you, writing newsletters and generally pursuing you until you satisfy the debt. Federal law offers you some protections against aggressive or harassing debt collectors, but they can continue their efforts as long as the debt is unpaid.

Lawsuit

In the worst-case scenario, failing to pay back your cash advance loan can result in your credit card company suing you for the unpaid debt. Credit card companies do not require you to give up some form of collateral when you get your credit card. Because of this, credit cards are known as unsecured debt. With unsecured debt, the only way the creditor can ensure it recovers the unpaid money is if it sues you in court and wins. When this happens, the creditor may be able to garnish your wages, seize your property or take money directly out of your bank account.

Credit Score

When you fail to pay back your cash advance on time, your late payment gets recorded on your credit report and lowers your credit score. Though credit score calculations differ widely, when the largest factors that makes up your score is your history of payments. When you fail to make a payment on time this lowers your score, and the longer you go without making the payments, the greater the impact.