In the world we all live in, almost everyone has a credit card. As we have discussed in earlier commentaries, there are both advantages and disadvantages of credit cards. All of those aside, I am going to talk today about a certain aspect of a credit card that I hope none of you have deal with, although I am sure some have. This is the aspect of the cash advance. Although this is a very easy way to get cash fast, one needs to be educated on the intricacies of this process as it is complex and costly.

Since most college students are, shall we say, monetarily challenged [poor], it is not uncommon for those students, including myself, to have some tough times in relation to money. As the semester is coming to a close, and all of those financial aid dollars are disappearing at a seemingly exponential rate, you may come into the situation where your bank account is getting low and you overdraft your account. This is an ugly situation, but sadly, it is faced by many students every day. When you are in a situation like this, it is important to step back and think before you take the most convenient way out. A credit card cash advance would momentarily fix the problem, but with fees and other expenses that fix would be short lived.

The first thing one must understand is the fees involved in a cash advance transaction. Fees are computed using two calculation methods. The first way that card issuers calculate fees is on a percentage basis, which typically ranges from 1% to 4%. Other issuers charge “flat fees” for advances, which means you pay the same fee no matter on the amount advance to the customer. A few companies do not charge fees but they are very rare, and one must have good credit to obtain such cards. Finally, if you absolutely have to get a cash advance, try to avoid using the ATM (unless it is operated by your cardholder) because you will be charged an additional fee from the owner of the ATM.

In addition to fees, one must understand that they do not pay the normal purchase interest rate from their card on advances. When you take out an advance, you are subject to interest charges from 20% to 25%. Also, advances do not have any grace period so that high interest percent starts accruing immediately. This means that even if you pay your balance in full, when the bill comes, you will still have paid interest on the advance.

If all that is not bad enough, there is one more thing that most people do not understand about the process. Credit card companies view your normal purchases and your cash advances as almost separate accounts even though they are on the same card. For example, let’s say that you bought $200 worth of goods on your credit card this month and that in addition to this you had to get a cash advance for $50. Now it is time to pay your bill and you send in a payment of $100. One would think that the credit card company would first apply $50 to the advances (since it is a higher interest rate) and then apply the rest to your regular purchases, however, this not how it works. When receiving payments, credit card companies will typically apply payments to the purchase side of your account before covering any cash advances. The only way around this is for the customer to request that the payment be applied to their balance of cash advances.

As we make are way through college, and try to figure out how to pay for everything [seems impossible at times], I hope that you are never put into a situation where you are thinking about a cash advance. However, if you are ever stuck in that situation, I hope you will remember this information and that it will help you to make the most informed and best decision for not only the moment but the future as well.

So last night I was doing some random surfing on the web and I came across an article that, in my opinion, accurately portrays the goal of Take Charge. Catherine Clifford, a staff writer at CNNMoney.com, wrote an article entitled “Befuddled by debt? You’re not alone…” about how two recent studies suggest that Americans in general are “financially illiterate”.

Clifford talks about how in one study, 1000 participants were surveyed on basic personal financial knowledge. One of the basic concepts of finance, compound interest (the concept of adding accumulated interest back to the principal, so that interest is earned on interest from that moment on according to Wikipedia.com) was accurately described by less than 40% of the participants. Clifford interviews a few different financial experts about the dangers of being financially illiterate and how that correlates to being caught up in debt.

Bob Neuhuas, the executive vice president and the head of the financial services sector in the U.S. for TNS, “If financial literacy was higher, you would see more caution in the use of consumer debt. It would not eliminate the problem, but it would mitigate [it].” The most alarming notion I took away from this article is describe through the following quote provided by Annamaria Lusardi, a Professor of Economics at Dartmouth College. She stated, “even those with a college degree don’t have an understanding of the basic finance ideas.” Unfortunately, this is true.

I must admit, after reading this article and while writing this excerpt, I had to go to Wikipedia.com to look for a specific definition of compound interest. As an accounting major, I am more than familiar with this concept; put a blank piece of paper in front of me, a few numbers, your interest rate and I will be more than happy to crunch some numbers out for you. But as this article kind of points out, I think it is a lot more difficult for college students to apply these basic concepts we learn about in school to everyday circumstances.

That is where Take Charge comes in. Hopefully, this site will serve as a medium for young adults and the financial world, making that transition from school learning to real life just a bit easier. It is this site’s goal to take the financial world, dissect the most important parts, put it on a grill, cook it to your liking, and spoon feed it to you so there is no fuss, no misunderstanding, and no dislike of the taste that is finance.

There is a lot more interesting, and admittedly repetitive and boring information in this article. If you want to check it out:

“click here”ß http://money.cnn.com/2008/02/26/pf/financial_illiteracy/index.htm

Hey everyone! construction on the site is going along smoothly. Expect lots and lots of new features to be added to the site within the next few weeks. Until then, here is a little taste of another area WSU SIFE is involved in. For Years, the Motion Pictures Association have held an Anti-Piracy video competition in which SIFE organizations across the nation compete. Here is Wichita State’s submission for this years competition. Personally, this video has changed my life and has brought to light the errors of my ways…enjoy!!!