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I had a card with a balance I'd been paying down over a long time. Last month I got a little extra cash, and made a lump-sum payment for the entire balance.

This week I got a letter telling me my cash advance limit was being reduced to 20% of my credit limit.

The letter didn't say that it was being reduced because I'd paid down the card, so I don't know for sure the two things are related.

Anyway, why does the bank have different limits for different types of charges? I mean, if my limit is $5K, and I charge $5K worth of "stuff," I'm still on the hook for that amount. From the bank's perspective, that amount is at risk.

Are CC users are more likely to default on cash advances than purchases?
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This week I got a letter telling me my cash advance limit was being reduced to 20% of my credit limit.

My credit cards range from 25% to 50% of credit limit for cash advances. It is common for cards to have a separate cash advance limit. It feels more like the card issuer is trying to manage risk rather than individually targeting you.

Are CC users are more likely to default on cash advances than purchases?

If you are willing to pay the interest rates and fees for a credit card cash advance, you are either desperate or stupid. Either would lead to a higher default rate.
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If you are willing to pay the interest rates and fees for a credit card cash advance, you are either desperate or stupid.

Generally, yes, but not all cash advances are desperate or stupid.

I did a BT from a high-rate card to a lower rate card with a zero-percent rate on the BT for 18 months. Even if I don't manage to pay it off, the rate is lower still makes sense.

Surely you don't think that was stupid on my part!
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I did a BT from a high-rate card to a lower rate card with a zero-percent rate on the BT for 18 months. Even if I don't manage to pay it off, the rate is lower still makes sense.

Balance transfers are different from cash advances, with completely different rate and fee structure. Cash advances normally carry 18+% interest rates plus fees.

Surely you don't think that was stupid on my part!

It wasn't a cash advance, so my comment doesn't apply.
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I don't know for sure, but I'm wondering if CC companies actually have to have a minimum amount of cash in reserves based on how much cash advance "credit" they dole out to customers.
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I don't know for sure, but I'm wondering if CC companies actually have to have a minimum amount of cash in reserves based on how much cash advance "credit" they dole out to customers.

I wonder how quickly they pay the bank that dispenses the cash. Credit card companies have to manage their cash flow to handle cash advances. Since they have the option to deny cash advances for any reason, they don't need a reserve that is equivalent to the total cash advance limits.
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stevenjklein,

What's a "cash advance limit"? ... And why would I need one?! ;-)

Seriously though, cash advances come with a huge cost to the card user and a huge risk to the bank. People should only take one in a dire emergency. (Say if you're stranded in a foreign country and need to get cash from an ATM.) And the bank should only lend a reasonable amount to limit its fraud risk, since they can't do a charge-back on a cash advance.

I'd suspect the bank was just trying to limit its fraud exposure. I doubt it has anything to do with you personally.

- Joel
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Seriously though, cash advances come with a huge cost to the card user and a huge risk to the bank.

Which is the reason that I destroy PINs for my credit cards.

I have accidently put a credit card in an ATM. The notice of fees and not having the PIN makes completing an accidental cash advance impossible.
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Is it a Chase card? We have a Chase Freedom card and recently got a letter reducing our cash advance limit to 20% of our credit limit.

We pay ours off every month. I don't know what would have precipitated the change.

But we never use cash advance anyway (other than once by mistake when DH used the card in an ATM instead of our debit card - cost us a $15 fee plus daily compounded interest for the day or two until our payment posted on it).

I'm wondering if it was just a change in the company policies or something.
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Is it a Chase card? We have a Chase Freedom card and recently got a letter reducing our cash advance limit to 20% of our credit limit.

We pay ours off every month…


Yes, mine is also a Chase Freedom card. I guess I didn't make it clear, but my real question was whether or not the change was linked to my having just paid off a longstanding balance.

Based on what you wrote, it was apparently just a coincidence.
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But we never use cash advance anyway (other than once by mistake when DH used the card in an ATM instead of our debit card - cost us a $15 fee plus daily compounded interest for the day or two until our payment posted on it).

How did he have the PIN to complete the transaction?

I have received randomly assigned PINs for my credit cards. It is unlikely, but possible that the PIN could match my ATM card. The only way this would seem to be possible would be if your bank assigned the same PIN to ATM and credit cards.
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I favor coincidence. Got the same letter from Chase Freedom.
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How did he have the PIN to complete the transaction

That's the really weird thing.

We don't understand why it actually worked. We were at the ATM at the credit union that we have our debit card through, and I think the machine even asked whether we wanted to use checking or savings for our transaction. The screens did seem slightly different, but not enough that he noticed that he'd used the wrong card. He said he used his debit pin, and I don't even know if we have a credit card pin or what it would be since we don't do cash advances. (It is possible that my husband knows if there is a pin for that credit card and what it is, as it was his card before we got together, but I can't imagine he'd not notice using a different pin when he always does his debit)
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(It is possible that my husband knows if there is a pin for that credit card and what it is, as it was his card before we got together, but I can't imagine he'd not notice using a different pin when he always does his debit)

There are a several possibilities: the bank set the PIN the same, they were accidently the same or your husband requested the PIN be the same as his debit card.
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