PSA: Set Your Cash Advance Limit To $0 To Reduce Your Risk & Always Have A Float

A few days ago, I tweeted the fact that some people had reported having their Serve loads code as a cash advance when using certain credit cards (mostly Chase). A few readers sent me panicked messages about this saying that they couldn’t afford to have this happen. My friends Travel With Grant & Frequent Miler both posted about this and there has been a lot of activity on FlyerTalk as well.

Since then, all three sources have reported that this was a false alarm (TWG & FM)

It looks like these loads were temporarily posting as cash advances and are now moving to purchases, so no cash advance fees are being charged. That said, I’d like to take this as an opportunity to have a look at some of dangers of manufactured spending.

When it comes to manufactured spending, it’s really important to remember a few things:

  • Never risk more than you can afford to lose
  • Always have a float
  • Always have multiple exit plans, in case one avenue closes up
  • Read extensively before starting
  • Start small and build up slowly

Let’s assume you did a load of $1,500 on the Chase Freedom, this card charges a cash advance fee of $10 or 3%. This means if the transaction did code as a cash advance you’d be stuck with a fee of $45 (realistically this would be lower as you can only load $200 per day and presumably you’d stop after the first load, that being said some people are careless and might not notice). But what happens if something worse happens? What if for some reason American Express holds your funds for several months? If you didn’t have a float and had to pay interest then you’d be stuck paying up to 22.99% interest (~$29 for the first month, which would only get worse as the interest compounds).

As you can see these types of fees easily dwarf the amount of money (or points or miles) that you can potentially earn. If you had your cash advance limit set to $0 then you don’t ruin that risk. If you have a sufficient float, you can always pay your credit card balance and avoid any interest charges.

Yes there is a chance that you’ll miss out on opportunities when the charge originally posts as a cash advance and then moves to a purchase. But manufactured spending is all about maximizing your profit by mitigating as much risk as possible (and you can always have one card without the limit set to $0 for when you find this an acceptable risk). For more information on how to reduce your cash advance limit to zero, I’d recommend reading this post.

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Alcwj
Alcwj (@guest_31446)
October 8, 2014 23:06

It’s funny that I actually set my Chase SP cash limit to $0 and Serve won’t allow me to reload starting 10/2. I have to call and raised it back and it finally went through.

You will need cash limit in this case, otherwise your transaction will be declined. On the other hand, most cash advance are temporary and eventually show as purchase.

Paolo
Paolo (@guest_34715)
October 26, 2014 21:48

Are we sure that the CA is considered as temporary? I lowered the limit on my Chase MileagePlus Explorer to $0 and the load to serve didn’t go through. I called Chase and I’ve been told that once it’s considered CA remains CA and will never show as purchase.