A cash advance can give you quick and easy access to money, but do you know the costs involved?
If you need money in a hurry, one of the easiest options is to use your credit card to withdraw notes from an ATM. This convenience comes at a hefty price, and it’s in your best interest to repay the debt as soon as possible to avoid the burden of compound interest. Read this quick guide to find out how interest works on cash advances and best practices for managing this kind of transaction.
What is a cash advance?
Credit card providers tend to charge different interest rates for purchases and cash advances, and the following transactions qualify as cash advances:
- Cash withdrawals. You can use your credit card to withdraw cash from an ATM, at a branch, or as cash out via EFTPOS, and your card provider will consider all such transactions as cash advances. This includes buying foreign currency or traveller's cheques as well.
- Gift cards and prepaid cards. As the money you load onto a gift card or prepaid card is equivalent to cash, these transactions are usually considered as cash advances when you pay with a credit card.
- Gambling. If you use your credit card to pay for gambling transactions, prepare to pay your card’s cash advance rate. The cash advance rate can also apply on expenses incurred in paying for food and beverage in gambling establishments.
- Unpaid balance transfer debt. If you get a credit card with a promotional balance transfer offer, there’s a good chance that outstanding transferred balances at the end of the introductory period will start attracting the card’s cash advance rate. Learn more about balance transfer rates.
How to calculate cash advance charges
First, divide the cash advance interest rate by 365 (number of days in a year). Then, multiply it by the amount withdrawn. Finally, multiply that number by the number of days from the transaction to the date it is paid (since cash advances start to accrue interest immediately). If your card charges a cash advance fee, you should add this to your final number to get the total cost of your cash advance.
As an example, you take $500 in notes out of an ATM, the cash advance rate is 21.99 percent, you pay the full amount back in 18 days and you are charged with a $4 cash advance fee.
- 21.99 percent / 365 days = 0.06024
- 0.06024 x $500 = $30.12
- $30.12 x 18 days = $542.22
- $542.22 /100 percent = $5.42
- $5.42 + $4 = $9.42
This means you will pay $9.42 to borrow $500 for 18 days.
Low cash advance credit cards comparison
What to consider before making a cash advance
Cash advances aren't the same as purchases. If you’re planning to use your card for a cash advance, here’s what you need to know:
- Minimum withdrawals. While you can use your credit card to pay for the smallest possible purchases, when it comes to withdrawing cash you may have to deal with a minimum withdrawal amount of $20 or more.
- Maximum limits. If you think you can use your credit card to withdraw cash up to your card’s available credit limit, think again. It is not uncommon for credit cards to have daily, weekly, and monthly cash advance limits in place. Maximum daily cash advance limits of less than $500 are rather common.
- Cash advances paid first. Your credit card provider applies your payments toward balances that attract the highest interest. Since cash advances tend to attract higher interest than purchases, you can be certain that your repayments will go towards reducing your cash advance balance first.
- High interest rate. Interest for cash advances is normally 20% p.a. or more, which is considerably higher than the purchase rate of around 13% p.a. that some low rate credit cards charge. This makes cash advances a rather expensive form of credit, and if you’re not in a hurry, getting a personal loan might be a better option.
- No interest-free days. Most credit cards give cardholders the ability to make use of interest-free days if they pay their closing balances in full each month. These interest-free days apply only on purchases, and not on cash advances. When you use your card for a cash advance, it starts attracting interest from the word go.
- Cash advance fees. In addition to paying a high cash advance rate, you could also have to pay a cash advance fee, which typically varies in between 1.5% to 4% or a flat fee of $2 - $4.
- Ineligible transaction. Cash advance transactions are not considered "eligible" when it comes to earning rewards points or meeting a minimum spend requirement.
While credit card cash advances can give you quick access to cash, the costs involved usually outweigh the benefits. Make sure you understand what is considered a cash advance and the interest rates and fees that apply to weigh up whether it's worth it.
Hello,
I was looking at a cash advance and realise the interest is higher but my question is say I owe $1000 on my credit card and get $100 cash advance do I pay the higher interest rate on the $100 until it’s paid in full or do I now pay the higher interest rate on the $1100 until it’s paid in full?
Hi BRETT,
Thank you for your inquiry.
Typically, regardless the amount the interest for cash advances is normally 20% p.a. or more, which is considerably higher than the purchase rate of around 13% p.a. that some low rate credit cards charge. This makes cash advances a rather expensive form of credit, and if you’re not in a hurry, getting a personal loan might be a better option.
I hope this information has helped.
Cheers,
Harold
Took a cash advance of $200, charged $5; Paid amount due for the month on time and next statement have additional interest charge of $1. Why when I paid it off and how long will this continue?
Hi Bradley,
Thank you for your question.
Your card will continue to charge interest each time you’re not able to pay your balance in full at the end of the payment cycle. So in the next statement you receive, you’ll be able to see your remaining balance in the previous statement plus interest.
However, if you have paid your account balance in full like you did for your cash advance, in your next statement, you will not be able to see any unpaid fees and interest. Unless if there are any due interest or fees that have not been accounted for in the previous statement/cut-off, these charges will most likely appear on your next statement.
Cheers,
May
Hi,
I was wondering with my credit card which has interest free period of 55 days on purchases whether a cash advance would affect my interest free rate on purchases?
For example, if I take a cash advance of $500 on 1st of June, if I then used my card for purchases on 4th June would I still have the interest free rate on purchases?
Thanks in advance.
Hi Harry,
Thanks for your question.
Interest-free days provide you with a period of purchasing with no interest charges. The requirement for receiving this benefit is to repay your balance in full by the payment due date. An example of that is the 55 interest-free days on purchases, excluding cash advances. So your cash advances will not affect your 55 interest-free days.
However, please keep in mind that if you use your card on any form of cash advance, your card will immediately charge you with interest and cash advance fees – which of course, you need to pay off as well on your due date.
I hope this has answered your question.
Cheers,
May
Hello
I would like to take a cash advance on my credit card which charges 21.49% PA for CA. I intend to have this paid back in 20 days.
Is the calculation I am using correct?
21.49 / 360 X 20 = 1.20%
Total amount to repay being $1518 excluding other fees?
Thank you
Hi Mark, thanks for your inquiry!
Nice work trying to work your interest repayment out, there are only a couple of figures that need replacing in your equation.
0.2149 / 365 x 20 = 0.01177534246
= 1.18% (2 decimal places)
You can multiply that percentage by your amount outstanding and number of days for the total amount of interest.
Cheers,
Jonathan
Hi there,
I am new to the credit card game. I am going overseas in the next few weeks and intend to use my credit card for purchases and for cash. I have a 21.49% cash advance rate – does this mean with every cash withdrawal I make I am charged 21.49% on top of what I withdrawal? For example I take out $200 will I then owe $42.98(21.49/100 x 200) on top of the $200 amount?
I have a debit card – should I transfer money from my credit account into my debit to make withdrawals or does this still come with a fee?
Thank you in advance :)
Hi Maddy, thanks for your inquiry!
The cash advance rate of 21.49% p.a. is calculated on a daily basis, multiplied by the cash advance amount outstanding by the number of days that the debt is remaining. Please refer to the following link for more information on Cash Advance Interest Rates. Withdrawal fees for credit cards depend on the bank, generally cash withdrawals from the bank’s ATM or partner ATM will not incur any fees. You may also like to refer to Low Interest Rate credit cards which can provide the flexibility and convenience to spend and make purchases on your card whilst taking advantage of lowest interest repayments.
Cheers,
Jonathan
Knowing that I’d need to take out $1000 cash advance overseas in a few weeks time, can I pre-load the same amount onto my platinum credit card and avoid interest charges?
Hi Alex, thanks for your inquiry!
That is correct. Loading/ depositing a credit amount above a 0 balance can provide interest free withdrawals. It is ideal to contact your bank/lender directly before depositing the funds to guarantee your interest-free withdrawals overseas.
Cheers,
Jonathan
Hi,
If I were to transfer money from my credit card to a friends credit card would that be considered a cash advance??
Thank you
Hi Mario, thanks for your inquiry!
Unfortunately transferring through cash advance from your credit card to another credit card is not eligible, unless the funds being transferred are in a credit balance (transferred above a neutral balance of 0).
Cheers,
Jonathan
I want to find a way to pay off a credit card debt. I took out a new card different bank to take advantage of 0% interest on balance transfer. Didn’t manage to get it paid off before that ended. Can I pay off a credit card debt that’s attracting a high interest rate with the other card which is lower? What are the pros and cons of this?
Hi Kristen, thanks for your inquiry.
Please see our guide on balance transferring debt amounts on this page for answers to your question.
I hope this helps!
Cheers,
Jonathan
I want to take out a cash advance of $2000 and pay it off in 60 days how much would I have to pay in total with the interest rate of 21.25%.
Thank you
Hi Jay,
Thanks for your question.
This really depends at what rate you pay the cash advance back. If you intend to pay the full amount back at the end of the 60-day period without making periodic repayments throughout, you’ll pay approximately $2070.80 ($2,000 x 3.54%).
I hope this has helped.
Thanks,
Elizabeth
i had a cash advance of $200 five years ago so why am i still paying cash advance fees of $28.11 per month
Hi Christine,
Thanks for your question.
If there is any outstanding balance left over from that cash advance you may still be paying interest on it. You might want to get in contact with your bank directly to understand what you’re being charged and find out how you can avoid future charges.
I hope this has helped.
Thanks,
Elizabeth