Understanding what cash advance interest rates are

A cash advance can give you quick and easy access to money, but do you know the costs involved?

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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 often 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.
  • 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.

What to consider before conducting 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 separate cash advance limits in place, such as no more than $500 a day.
  • High interest. Interest for cash advances is often considerably higher than the purchase rate of around 13% p.a. You might find with some low rate credit cards. 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.
  • No reward points. Unfortunately, cash advance transactions don’t usually earn reward points.

While credit card cash advances can give you quick access to cash, the costs involved get sometimes 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.

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Commonly asked questions about cash advances

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