An important feature of credit cards is that they allow you to withdraw cash from ATMs or through EFTPOS terminals in the form of cash advances. Compared to standard purchases, these transactions typically attract a higher interest rate and a cash advance fee. However, there is a selection of credit cards that charge a more competitive interest rate for cash advances, making it more affordable to withdraw money using your credit card.
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.
A cash advance is a type of credit card transaction that allows you to get cash or an equivalent to cash, such as foreign currency. This means you can spend the money however you want, leading to higher risks for lenders. So you usually have to pay a higher interest rate for cash advance transactions, as well as a cash advance fee. In addition to getting cash out with your credit card, other transactions that may be considered cash advances include balance transfers, buying foreign currency, gift cards or prepaid card purchases and top-ups, and 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 to 4% of the total transaction. Please read our guide on cash advance transactions for more details.
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.
This type of card could be 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 (or you can’t use a debit card). Note that even if you get a card with a low-interest rate, you still have to pay a cash advance fee for these transactions. Cash advances are also not eligible for anyinterest-free daysyour card may offer for standard purchases, which means interest is charged from the time the transaction is made until it’s 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 are overseas or shopping somewhere that only accepts cash.
What is the difference between a cash advance and a purchase?
While a cash advance refers to 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 a different purchase and cash advance rates and cash advance rates are typically higher.
How to compare low cash advance credit cards
If you’re thinking of getting a credit card and using it for cash advances, make sure you also consider the following factors:
Interest rates. Remember that the standard variable cash advance rate may not be the same as the purchase rate, so it is essential 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 card’s features and consider whether they offset the annual fee so you can choose a product that is affordable for you.
ATM fees.Some credit cards charge a separate fee when you withdraw money from an ATM. Fees from ATM operators may also apply – especially if you’re getting cash out with your credit card overseas.
International transaction fee. Most credit cards charge a fee of 2 to 4% for transactions made in a foreign currency. If you plan to use 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 the overall cost of a cash advance.
Introductory offers.Some credit cards offer sign-up bonuses and introductory0% 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 can take advantage of this type of offer based on the way you plan to use your card.
What else do I need to be aware of?
Using a credit card for a cash advance is not at the top of most people’s list as it is relatively expensive, but there are instances when you may have no other option. If you end up getting a cash advance using your credit card, make sure you consider the following:
Budget for repayments. The longer you carry a balance on your credit card, the more interest you 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. Each day you carry a balance from a cash advance, you pay a little bit more for the privilege. However, by making payments before your statement is due, you can reduce the overall cost of the 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 available payment options. This also helps you keep track of the balance.
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 to 15 minutes. Make sure you meet the eligibility requirements for the card; these can vary from card to card, but typically include the following criteria:
You must be over 18 years of age
You must be a citizen or permanent resident of New Zealand, or meet the temporary resident requirements
You must have a good credit rating
If you meet the application requirements, you can begin your application. Have the following documents and details ready 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. If self-employed, you may need your accountant’s details
Details about your income, expenditure, assets and liabilities
Can I get a cash advance without a credit card?
If you need cash and don’t want to use your credit card, another option is to look at short-term loans, including online cash advances. This gives you a way to get a cash advance (or loan) even if you don’t have a credit card. Just remember to consider the rates, fees and repayments to decide if this option suits your financial situation. Low cash advance rate credit cards can give you a way to get money quickly but the rates and fees may still lead to more debt in the long run. So remember to consider your options carefully and, if you need help, consider support services that could assist you to manage your financial situation.
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Frequently asked questions
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, which may 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.
You can continue making minimum monthly payments until you clear the balance completely, but by doing so, you 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.
You can consider getting a secured or unsecured personal loan – both tend to charge lower interest rates than credit cards. How quickly you get access to funds depends on the loan issuer.
Amy Bradney-George is the acting editor for Finder X and a senior writer for credit cards and Finder Green. She has more than 13 years' experience as a journalist and writer, with bylines in publications including The Equity Magazine, The Sydney Morning Herald, ABC News and produce industry website FreshPlaza. Amy has a Bachelor of Arts in Journalism and Drama from Griffith University, and when she’s not putting (virtual) pen to paper, she spends her time as an actress.
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