Credit card cash advances have hit a 20-year low
Australians are cutting back on using their credit cards for withdrawing money and other cash advances.
Cash advances are one of the most expensive ways to use your credit card. This is because they usually immediately accrue interest rates as high as 22% and a cash advance fee of around 2%. But in good news for Aussie cardholders, credit card cash advances are at a record low since 1996.
According to finder’s analysis of new data from the Reserve Bank of Australia (RBA), the sum of all cash advances over the year is at its lowest point since the mid 90s. Aussies made 24 million cash advances over the last 12 months since March 2017, which is down from a high of 39 million withdrawals in the 12 months to July 2006. The next lowest 12 month rolling average, 24 million, occurred in June 1996.
However, the average size of individual cash advances in Australia is $400 as of March 2018, which is almost on par with the ten year average of $388 per transaction. So rather than our cash advances getting smaller, it would appear we're just using them less.
Considering the high interest rates and fees that come with using your card for a cash advance, this is encouraging. In the current Australian credit card market, the average interest rate for cash advance transactions is 19.20%, which is higher than the average purchase rate of 16.91% for regular purchases.
This downwards trend of cash advances could be driven by our reliance on plastic over cash in our move towards a cashless society. However, as cash advances include more than just ATM withdrawals, hopefully it is also a result of greater awareness around the cost of cash advances and an uplift in savvy card behaviour.
There are a few different transaction types that are considered cash advances including ATM withdrawals, balance transfers and gambling transactions. If you do regularly use your card for cash advances, you may want to consider a card that charges a lower interest rate on these transactions to keep your card costs under control.
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