How to use cash advances wisely

Many consumers use cash advances from their credit cards to pay other bills and buy groceries. The temptation is great, but the penalties are severe, says Dawn Gatling, director of education at Consumer Credit Counseling Service of Greater Atlanta. "It's like a snowball running down a hill. Your debt is getting out of control," she says.

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So how do you avoid heading downhill fast? Here are a few suggestions on how to use credit wisely and put the brakes on:

• Start with the basics: Make sure that each month you're spending less than you earn. If not, curb spending or supplement your income.
• Before using your credit card for cash advances, read the agreement carefully for fees and interest information. If you don't understand the terms, call the card issuer.
• If you must get a cash advance from a credit card, go to your bank instead of using the nearest ATM. At your bank, you'll avoid the extra fee that the ATM owner often tacks on. In addition, a bank will let you withdraw a larger sum -- usually up to the cash advance limit allowed by your card. An ATM has a much lower limit per transaction.
• Look out that you're not getting in over your head: Experts say the signal that you're headed for trouble is when more than 20 percent of your income goes to pay unsecured credit debt.
• If you must use plastic, try using your debit cards. That way, you can track spending more accurately and closely.
• Start saving money consistently so you have an emergency fund. Then you don't have to depend on the credit cards.
• If you take a cash advance, repay it when the bill arrives. It's a loan, not free money.
• Keep track of your charges and deduct the amount from your checking account so you can make the payment when the bill arrives.
• Limit your credit cards to no more than three general-purpose cards.

If you're already drowning in debt, here's how to save yourself:

• Change to a lower-interest card, but be careful of introductory rate offers and fees associated with transferred balances.
• Pay high-interest debts off first, even if the balance is greater on other cards.
• If you can't pay off the balance entirely, then pay back all that you spent during the previous month.
• Avoid only paying the minimum balance. Pay as much as possible.
• Make payments on time. Late fees can amount to nearly $30 a month and are usually accompanied by increases in interest rates.
• If you can't get a handle on your debt, consult a consumer counselor.