Need cash fast? ATM limit too low? Did you know you could walk into the bank and get a cash advance with your debit card?
Paying with cash is like using the bathroom. When you gotta do it, you gotta do it. And while cash-only transactions might not be as common now in the age of your Venmos and your Paypals, it’s still something you’re going to encounter every so often.
Even if you don’t carry cash around on the regular, any small cash transaction can be handled pretty easily. You can just go to your local ATM and make a withdrawal, or you can pop into the store and get cash back.
But if you need to make a larger cash transaction—like paying for a used car—then you’re going to have to turn elsewhere. You’ll probably have to take out a cash advance on your debit card. Not familiar with how that works? No worries. That’s what we’re here for.
What is a cash advance?
A cash advance is when you use your credit card to withdraw cash, whether you do that at an ATM, in a branch, or at the checkout of the supermarket. Cash advances usually incur a cash advance fee, which may be a flat fee or a percentage fee based on the amount of cash you withdraw. Interest is charged on cash advances from the time you make the withdrawal, and the interest rate applying to cash advances is usually much higher than the interest rate for making purchases.
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The credit card cash advance interest rate on your card is the credit card interest rate charged when you use your credit card to access cash directly or a cash equivalent transaction. Examples of these types of transactions include:
- Withdrawing cash directly from an ATM or over the counter at a bank branch
- The purchase of travellers’ cheques
- Gambling transactions such as purchasing chips at a casino or with a betting agency
- BPAY transactions where the biller does not accept regular payments from a credit card (your issuer will warn you if this type of transaction will occur)
Credit card cash advances accrue interest at a higher rate than interest on purchases, sometimes charging twice the interest, but that may not always be the case. For more on difference types of credit card interest rates, have a look at this article.
Interest rates for cash advances vary widely, as you can see from the rates currently on the Canstar database:
|Cash Advance Interest Rate: Non-Rewards Credit Cards|
|8.99% p.a.||17.71% p.a.||24.50% p.a.|
Source: www.canstar.com.au Rates current as at 26 October 2016.
It is important to be aware that in addition to higher interest rates, credit card cash advances will attract a fee in addition to the cash advance amount. These fees vary but are usually the greatest of 3% or $5. A cash withdrawal of $1000 would in this case attract a fee of $30 added to your credit card statement.
What are the costs of a credit card cash advance?
Certainly, an instant credit card cash advance is a way of getting hold of money in an emergency or when other accounts are empty but the practice is fraught with danger, particularly if you are making a habit of it.
Why? Because interest on credit card cash advances is up to 10% higher than your usual card rate, plus that hefty interest is charged straight away, almost as soon as you finish at the ATM. There are no interest-free days for you to repay the cash advance, so you can really clock up some debt if you are not careful. This is especially dangerous if you’re paying the current maximum interest rate of 24.50% p.a. for cash advances.
But wait, there’s more! As well as paying the higher interest rate on a cash advance, consumers are also charged fees. Cash advances in Australia can tend to charge an access fee of around 3% or $5, whichever is greater.
It’s normal for overseas cash advances to attract fees ranging from $4 to $5 as well as a fee paid to the owner of the ATM used, as we saw in our 2016 star ratings of travel credit cards and debit cards.
You can find out more on the costs of cash advances here.