A cash advance can give you quick and easy access to money, but do you know the costs involved?
If you require money in a hurry, one of the easiest options is to use your credit card to withdraw money from an ATM. This convenience, though, comes at a price, and it’s in your most interest to try and repay the money as soon as possible.
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.
- Purchasing foreign currency. Paying for foreign currency or traveller’s cheques using your credit card would qualify as cash advances.
- 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.
- Balance transfer revert rate. 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 promotional period will start attracting the card’s cash advance rate. Learn more about balance transfer rates.
Low cash advance credit cards comparison
How do cash advances work?
Cash advances don’t the same as a purchase, and 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. Regulatory changes in how credit card providers apply payments ensure that you credit card provider applies your payments towards 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.
Pros and cons of cash advances
- Quick access to money. Getting a loan requires that you go through an application process and approval isn’t certain. With a credit card, you can access funds up to a given limit at any time, as and when required.
- Use money for any purpose. You can use money you receive through a cash advance for just about any purpose. You can use this money for household expenses, to pay bills, for auto repairs, or just to settle a temporary setback.
- High interest. 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%.
Your credit card gives you easy means to access money in an emergency, but given the costs involved, it is ideal that you take this route as a last resort. If you wish to apply for a new credit card that you can use for cash advances, make sure you compare your options well.Back to top
Frequently asked questions
What do I do once I've made a cash advance?
What you can do is to repay your cash advance as soon as you can afford it. People who only need a cash advance for a few days until payday should jump to their online credit card account and pay their cash advance as soon as they receive their pay.
Do credit card providers consider bill payments as cash advances or purchases?
This essentially depends on any given biller’s setup with BPAY. If your biller accepts credit cards as a form of payment, your card provider would process your transaction as a purchase. If the biller does not accept payments via credit cards, your card provider might still let you go through with the payment, and it would process such a transaction as a cash advance.
If I get a rewards credit card, would using it for cash advances earn reward points?
Cash advances don’t earn reward points. You can only earn reward points when you use your card to make eligible purchases, and in some instances, bill payments earn reward points.
If I use my credit card to withdraw cash from an ATM, would I have to pay ATM fees as well?
You won’t have to pay ATM fees if you use an ATM that belongs to your financial institution or its ATM partner network. In all other cases, you would have to pay ATM fees.