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What are credit card cash advances and how do they work?

Discover what's considered a credit card cash advance and what interest rates and fees you'll pay.

Most credit cards give you the ability to withdraw cash from your card balance. Known as a credit card cash advance, these transactions often attract a higher interest rate than purchases.

Cash advances also come with other restrictions, such as not being eligible for interest-free days or rewards points. Along with the higher interest rate and restrictions, these transactions can also attract additional cash advance fees.

What is a credit card cash advance?

A credit card cash advance is a transaction that gives you quick access to cash via an ATM or bank and typically comes with a high interest rate that will begin to accumulate from the moment you withdraw the funds. Credit card providers have individual terms for the transactions that they define as “credit card cash advances,” and these definitions will be clearly outlined in the Terms and Conditions of your card.

Compare low credit card cash advance interest rates

Name Product Welcome Offer Rewards Purchase Interest Rate Cash Advance Rate Annual Fee Min. Credit Score Description
Scotiabank Value Visa Card
0% rate on Cash Advances for 6 months
Min. recommended credit score: 660
Get a 0.00% introductory interest rate on Cash Advances for the first 6 months. Plus, pay no annual fee in the first year. Apply by October 31, 2022.
National Bank Syncro Mastercard
8.90% or prime + 4.00%
Min. recommended credit score: 660
Enjoy low purchase interest, cash advance and balance transfer rates.

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Types of credit card cash advance transactions

The five most common credit card cash advance transactions include:

  • ATM withdrawals and cash out. Using your credit card to withdraw money from an ATM or at the checkout is a cash advance. Additional fees could also apply if you use your credit card at a non-network ATM.
  • Gambling transactions. Purchasing lottery tickets, placing bets and paying for gambling at a casino or online are usually considered cash advances. You may also have to pay the cash advance rate on food and drinks while at a casino.
  • Gift cards and prepaid cards. Most credit card providers consider purchasing and loading money onto a gift card or other prepaid card as a “cash equivalent” transaction that is subject to the cash advance fee and interest rate.
  • Credit card cheques. Some credit card providers send cheques to cardholders that they can use to withdraw money from their accounts when they like. While using these cheques can be tempting, you may want to reconsider to avoid the expense.
  • Buying foreign currency or traveller’s cheques. Using your credit card to buy foreign currency or traveller’s cheques is considered to be a cash advance. If you’re heading overseas, consider looking into a card specifically designed for travel.

Additional transactions that may be defined as credit card cash advances on your credit card include the following:

  • Government payments. Some taxes and fees paid to the Government using your credit card may be considered a cash advance transaction. This means you will incur the cash advance interest rate and any applicable fees. Read the Terms and Conditions of your card or call customer service to find out if your provider considers some, or all, government payments as cash advances.
  • Balance transfers. Some credit cards come with balance transfer offers, giving cardholders the ability to save money on interest charges for a specified time period. In some cases, outstanding balances from balance transfers start attracting the card’s cash advance rate at the end of the promotional period, instead of the purchase rate. As a result, if you don’t repay the balance completely before the introductory period ends, you could end up paying more than you initially expected.
  • Transferring between accounts. When you use your credit card account to transfer funds to another account, your card provider will view it as a cash advance. Instances of this include repaying a loan taken from a friend and transferring money into your everyday banking account. One way to avoid paying interest on such transactions is to use your debit card instead. If you do plan to use your credit card for electronic transfers, review the fees and charges before you make the transfer.

Do bill payments count as cash advances?

It depends. Although exact rules can vary between card providers, bill payments generally don’t count as cash advances if you authorize another party to withdraw funds from your card at specific times (i.e. set up a pre-authorized payment). But if you initiate a withdrawal by taking funds from your card to pay a bill, it usually counts as a cash advance.

You may be charged cash advance fees if:

  • You transfer funds from your credit card to a separate account (i.e. chequing or savings) then send those funds to a third party
  • You login to your credit card account and use a bill payment, cash advance or withdrawal feature to send funds to a third party
  • You withdraw funds from your credit card via ATM
  • You visit a local bank branch and request a withdrawal or cash advance from your credit card

You may be able to avoid cash advance fees if:

  • You visit a third party website and input your credit card information to pay a bill (much like making an online purchase)
  • You give a third party your credit card information and pre-authorize them to withdraw funds whenever a bill is due
  • Your credit card provider withdraws funds to cover credit card fees. (Note that if this puts you over your credit limit, you could be charged a penalty. You could also be penalized for missing credit card payments or making late payments.)

What is a cash advance fee?

woman-phone-card 250x250Most credit card providers will charge both a cash advance fee and cash advance interest rate for applicable transactions. Your credit card provider can charge a fixed dollar value or a percentage of each cash advance as a cash advance fee. This normally applies to all ATM withdrawals, transfers and cash equivalent transactions.

To find out exactly how much you’ll be charged, check the Product Disclosure Statement or Terms and Conditions. If you’re unsure or can’t find this information, contact your credit card issuer to confirm what rates and fees apply before choosing a credit card or using one for cash advances.

As an example, cash advances for credit cards with a purchase rate of 19.99% typically come with cash advance rates of 22.99%. Fees are generally around $10 or 5% of the transaction cost.

Pro tip

If you often use your credit card for cash advance transactions, you may want to look at credit cards that charge the same interest rate for both purchases and cash advances or charge a low interest rate for cash advances. While you’ll still have to pay the credit card cash advance fee immediately, these types of cards make it easier to keep track of the interest charges and sometimes offer lower rates than other credit cards.

What to look out for

Credit card cash advances aren’t treated 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. 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 quite common.
  • Cash advances are paid first. Regulatory changes in how credit card providers apply payments to ensure that your credit card provider applies your payments towards balances that attract the highest interest rates. You can be certain that your repayments will go towards reducing your cash advance balance first.
  • High interest. Interest for cash advances is typically 22.99% APR or higher. 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 periods. Most credit cards give cardholders the ability to make use of an interest-free period if they pay their closing balances in full each month. These interest-free periods apply only on purchases, and not on cash advances. When you use your card for a cash advance, it starts attracting interest immediately.
  • Cash advance fees. In addition to paying a high cash advance interest rate, you could also have to pay a cash advance fee. Typically this is a flat rate or percentage, for example, $10 or 5% of the transaction, whichever is greater.
  • Fees for overseas cash advances. If you’re considering using your credit card for cash advances when travelling overseas, take into account that you could have to pay extra in the form of ATM fees and international transaction fees. You may be able to find a card that offers lower foreign transaction and currency conversion fees.
  • Limited reward points. Typically, you won’t earn reward points for credit card cash advances, unless a card comes with some kind of promotional offer.

Credit cards generally aren’t designed to be used as an ATM card. If you think that you’ll regularly be taking out cash advances, you may want to consider another option to avoid accruing high fees. Regardless, make sure to read the Terms and Conditions before applying to ensure that you’re not confronted with any nasty surprises when you get your hands on the card.

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