Learn about the fees and charges that apply when you use your credit card for a cash advance and how to avoid them.
A cash advance is a type of credit card transaction where you get cash or an equivalent. While ATM withdrawals are the most common type of cash advance transaction, others could include buying gift cards, paying bills, gambling or purchasing foreign currency.
Despite the fact that we’re making fewer trips to the ATM, the number of Australians using their credit card for a cash advance is on the rise. While it may be convenient, using your credit card for this reason is expensive, attracting additional fees and high interest charges. Read on to find out the potential costs and how to reduce them.
How much does a cash advance cost?
You can view a range of cash advance interest rates and fees charged by major financial institutions in the following table. These rates vary between cards, so it’s still important to check the details of your individual credit card for specific fees that will apply to you.
| Credit card issuer | Cash advance interest rate | Cash advance fee |
|---|---|---|
| ANZ | 14.49% p.a.–21.74% p.a. | The greater of 2% or $4.00 |
| Bankwest | 21.99% p.a. | 2% of transaction amount or $4 (whichever is greater) |
| Citi | 19.99% p.a.–21.74% p.a. | 3.5% of transaction amount |
| Commonwealth Bank | 14.55% p.a.–21.74% p.a. | $2.50 or 2% of the transaction amount (whichever is greater) |
| HSBC | 21.99% p.a. | The higher of $4 or 3.0% of the total transaction amount |
| NAB | 13.25% p.a.–21.74% p.a. | 2% or $2.50, whichever is greater |
| St.George | 20.24% p.a.–21.49% p.a. | 2% of the value of the transaction or minimum charge of $2.50 |
| Suncorp Bank | 19.45% p.a.–21.99% p.a. | 3.5% of the transaction amount, with a minimum fee of $3.50 |
| Westpac | 20.24% p.a.–21.49% p.a. | 2% of the transaction amount or $2.50 |
* Table details current as of 28 September 2016
This table gives you a clear idea of just how expensive cash advances can be, with most interest rates between 17-21.99% p.a. And while the lowest fee is just $2.50, generally you’ll pay a percentage of the total transaction amount, which ranges from 2–3.5%. To put that in perspective, if you withdraw $1,000 from an ATM with a Citi or Suncorp credit card, you will pay a fee of $35, and that’s not counting the interest charges.
When would I be charged cash advance fees and interest rates?
Some of the most common transactions that attract fees and rates include:
- ATM withdrawals. Using your credit card to withdraw cash at an ATM attracts cash advance interest and fees. ATM fees can apply as well. Some credit card companies allow you to preload your own money on your credit card so you can avoid interest and fees when you withdraw cash.
- Gift cards. Using your credit card to buy gift cards is usually defined as a cash advance because the money loaded onto the card is equivalent to cash.
- Prepaid cards. As a prepaid card gives you access to funds you can use for almost anything, buying or loading money onto one with a credit card will typically attract the cash advance fee and interest charges.
- Balance transfers. Balance transfer promotional rates revert to the purchase rate or the cash advance rate of interest at the end of the introductory period. Have a look at our balance transfer credit card review and application pages to find out about the revert rate.
- Gambling purchases. Using your credit card for gambling purchases such as online poker may be treated as a cash advance. Find out if you can use your credit card for gambling purchases and whether it will incur charges.
- Foreign currency. Financial institutions treat the purchase of foreign cash or travellers cheques as a cash advance.
- Online transfers. Online money transfers from your credit card account to your transaction or savings account is a cash advance.
- Utility payments. Some credit card companies apply cash advance rates and fees to payments for utilities such as gas, electricity, phone and Internet accounts.
- Government payments. In some instances, government charges such as payments to the ATO could be processed as cash advances and attract these fees and charges.
Which credit card transactions are treated as a cash advance?
Other important facts about credit card cash advances
Reasons why cash advances are so expensive.
- Higher rates than purchases. The cash advance interest rate can be more than double the purchase rate of interest.
- No interest-free days. Unlike purchases,cash advance transactions are not eligible for interest-free days. The transaction accrues interest at the cash advance rate of interest from the time it is made until you pay it off in full.
- Cash advance fees. This fee is charged for each cash advance and is the greater of a percentage of the cash advance amount or a flat fee, for example $2.50 or 2%. Cash advance fees are added to your cash advance balance and accrue interest at the cash advance rate immediately.
- Overseas cash advances. If you use your card for cash advances while you’re overseas, a higher cash advance fee may apply from your bank. Plus, local ATM fees may also apply on international cash advance transactions.
- Cash advance limits. The amount of advanced cash you can withdraw in one day is capped by credit card companies, typically at around $800–$1,000 per day, or as a percentage of your credit limit.
- Repayments. If you have multiple balances accruing interest on one card (such as purchases, cash advances and a balance transfer), those that attract the highest interest charges will be paid first when you make a repayment to your credit card. This usually means cash advances are repaid first, purchases second and balances eligible for low-interest promotions (such as a balance transfer) last.
- No points. Cash advances are ineligible for points if you have a rewards or frequent flyer credit card.
Important things to know about using your credit card for cash advances
Compare credit cards with no cash advance fees
Using your credit card at the ATM is significantly more expensive than using it to purchase goods and services. If you regularly use your card for cash advance transactions, you may want to consider looking for ones with a promotion on cash advances. You can use these credit cards to withdraw cash for less during the promotional period. Cash advance fees can still apply.
Images: Shutterstock
