Want to withdraw cash from your credit card without incurring high cash advance fees? Compare low cash advance rate credit cards here.
Here, we compare low cash advance rate credit cards, explain how they work and look at the other factors to consider before choosing and using a credit card for cash advances.
How do low cash advance credit cards work?
Low cash advance rate credit cards offer similar features to other credit cards but charge a more competitive interest rate on cash advances. Many of these cards actually charge the same interest rate for both purchases and cash advance transactions.
Note that even with the lower interest rate, you'll still have to pay a cash advance fee every time you use a credit card for a cash advance. These transactions also won't be eligible for any interest-free days your card may offer for standard purchases, which means interest will accrue from the time the transaction is made until it is paid off in full.
What are the benefits of low cash advance rate cards?
Low cash advance rate credit cards give you a more affordable way to use your credit card for a cash advance transaction. This can be particularly useful if you need access to extra funds but can't use your credit card to make a payment. For example, if you're overseas or shopping somewhere that only accepts cash.
What exactly is a cash advance?
A cash advance is when you use your credit card to access money, for example if you get cash out at a supermarket or ATM. Cash advances can also include "cash equivalent" transactions, such as using your credit card to buy gift cards, foreign currency, travellers cheques or for gambling transactions.
As these transactions give you access to actual money or an equivalent, they typically attract a higher interest rate, as well as a cash advance fee worth 2-4% of the total transaction. The easiest way to avoid these costs is to avoid using your credit card for cash advances.
What is the difference between cash advances and purchases?
While a cash advance refers to you using your credit card to access money, purchases refer to instances when you use your credit card to pay for products and services. Most credit cards charge different purchase and cash advance rates, and cash advance rates are typically higher.
How to compare low cash advance credit cards
Not all low cash advance rate credit cards are the same, so when you consider applying for one, take some time to compare the following aspects:
- Interest rates. Remember that the standard variable cash advance rate may not be the same as the purchase rate, so it's important to look at both.
- Cash advance fee. This fee is charged every time you make a cash advance transaction. It is usually represented as the greater of a fixed dollar amount or percentage. For example, "$3 or 3% of the transaction, whichever is greater".
- Annual fee. Credit card annual fees can range from $20 to $400 or more. When considering this cost, weigh up the features of the card and consider whether they will offset the annual fee so that you can choose a product that's affordable based on your circumstances.
- International transaction fee. Most credit cards charge a fee of 2-4% for transactions made in a foreign currency. If you plan on using a low cash advance rate credit card for transactions overseas or online (such as foreign ATM withdrawals or Internet gambling), make sure you also consider this fee and how it could impact on the overall cost of a cash advance.
- Introductory offers. A range of credit cards offer signup bonuses and introductory 0% interest rates for purchases or balance transfers. These offers can add short-term value to the card you choose, but it's important to note that the benefits usually don't apply to cash advance transactions. Always read the terms and conditions to make sure you will be able to take advantage of this type of offer based on the way you plan to use your card.
What else should I bear in mind?
Using a credit card for a cash advance is not on the top of most people’s list, but there are instances when you may have no other option. If you end up getting a cash advance using your credit card, keep the following in mind:
- Budget for repayments. The longer you carry a balance on your credit card, the more interest you will pay. Factoring repayments into your budget or using savings to clear the balance can help keep these costs to a minimum.
- Make a payment as soon as possible. While credit card interest is charged monthly, it is actually calculated daily. This means each day you carry a balance from a cash advance, you will be paying a little bit more for the privilege. But by making payments before your statement is due, you can reduce the overall cost of a cash advance. You can do this any time by transferring money from your everyday bank account, or by logging into your credit card's Internet banking facility and reviewing the payment options available. This will also help you keep track of the balance.
- Overseas fees for cash advances. If you use your credit card to get cash out while travelling overseas, you could have to pay ATM fees and international transaction fees. These costs would be in addition to the cash advance fee and interest charges. Note that international transaction fees can also apply when you use your card to make purchases through international websites.
- Rewards. If your credit card comes linked to a rewards program, any cash advances you make won't be eligible for rewards. This is also the case for balance transfers.
How do I apply for a low cash advance credit card?
Applying for a low cash advance rate card is simple and can be completed online in around 10-15 minutes. After comparing cards and choosing one that suits your needs, just click the "Go to Site" button. Before that, make sure you meet the eligibility requirements for the card. These can vary from card to card, but generally include the following criteria:
- You must be over 18 years of age
- You must be a permanent resident of Australia, an Australian citizen or meet the temporary resident requirements
- You must have good credit rating
If you meet the application requirements, you can begin your application. Keep the following documents and details handy to speed up the process:
- Your name, date of birth, marital status, and number of dependents
- Your residential status, home address, email address, and phone number
- Your employer’s name and contact details
- Details about your income, expenditure, assets, and liabilities
Frequently asked questions
Why do cash advances attract high interest rates?
Unlike regular credit card purchases, cash advances give you access to actual money or an equivalent. In this sense, they are similar to more traditional loans but don't require you to apply for more credit. This could suggest to a lender that a person is desperate for funds or needs cash to make a questionable purchase. As a result, most credit card providers view cash advances as "higher risk" transactions and apply higher interest rates and fees.
Do I have to repay a cash advance within a given time period?
You can continue making minimum monthly payments until you clear the balance completely, but by doing so you would end up paying a lot in interest. Ideally, you should aim to pay the balance off in full as quickly as possible to keep these costs to a minimum.
What other options do I have to get money in a hurry?
You can consider getting a secured or unsecured personal loan – both tend to charge lower interest rates when compared to credit cards. Just how quickly you get access to funds depends on the loan issuer.
The most popular use of credit cards is ultimately, using them for purchases. Banks therefore tend to only promote the 'purchase' rate, usually leaving the much higher cash advance rate hidden in the terms & conditions. Cash advances are where financial issuers can charge a bit more because there is less competition for cash advance interest rates.
All it takes is one cash advance to incur a $2-$10 withdrawal fee.