Cash advances interest rates and fees

How much do cash advance transactions cost?

• Cash advance rates. Most credit cards charge a cash advance interest rate above 21%. This is much higher than the purchase rates on most cards.
• Cash advance fees. Cash advances typically attract a fee that's worth 3-3.5% of the transaction, which is added to your credit card's balance. That means you would pay between $3 and $3.50 for every $100 spent on a cash advance.

Credit card provider cash advance charges

Here are details for some of the cash advance fee and interest rates charged by major financial institutions.

Example: Cash advance transaction cost

Here's an example. You withdraw $500 from an ATM with your credit card. You pay it back in 10 days.

• Cash advance fee: 3%. That's $15 up front.
• Cash advance rate: 21.99%.
• Repayment: You pay the $500 off in 10 days.
• The combined interest and fee costs you $18.

Use a credit card repayment calculator to quickly work out cash advance interest rate costs.

• How we calculated the cash advance interest charge

  1. Divide the cash advance interest rate by 365 (the number of days in a year)
  2. Multiply this value by the amount withdrawn
  3. Multiply that value by the number of days from the time of the transaction to the date it is paid (since cash advances start to accrue interest immediately)

  In the example of a $500 withdrawal repaid in 10 days we get the following:

  1. 21.99 percent / 365 days = 0.06024
  2. 0.06024 x $500 = $30.12
  3. $30.12 x 10 days = $301.20
  4. $301.20 /100 = $3.012

What type of transactions are considered cash advances?

A cash advance is typically considered as any transaction that involves withdrawing money or getting a cash equivalent. According to ABS data Australians spend about $368.25 per credit per year on cash advance transactions.

Every credit card provider has its own way of defining a cash advance and details are included in the card terms and conditions.

The 5 most common cash advance transactions

1. ATM withdrawals and cash out. One of the most common examples of a cash advance is when you use your credit card to withdraw money from an ATM or get cash out in a shop.
2. Transfers between accounts. If you transfer funds from your credit card to an account, your card issuer will view it as a cash advance (even if it's a linked bank account). Some credit cards don't offer this type of transfer. But even if yours does, you can avoid cash advance fees by using a transaction account instead.
3. Buying foreign currency. Using your credit card to buy foreign currency or traveller's cheques also attract a cash advance fee and cash advance interest rate.
4. Gambling transactions. Credit cards have restrictions on gambling transactions. But if you're able to use your card to buy lottery tickets, scratchies or for other gambling, it would typically be treated as a cash advance by most credit card providers.
5. Stored value cards. Some credit card providers include the purchase or re-loading of "stored value cards" as a cash advance or cash equivalent transaction. This can include gift cards and prepaid, reloadable cards. But it may vary depending on what type of business you're buying the card from.

Other transactions that may be defined as cash advances on your card

• Bill and BPAY payments. Some credit card providers process bill payments as cash advance transactions. For example, BPAY payments, utility bills and government charges such as property rates or ATO bills.
• Buying cryptocurrency. If you have a credit card that allows you to buy cryptocurrency it will be considered a cash advance transaction.
• Balance transfers. While balance transfers are not typically defined as cash advances, it's worth noting that many credit cards apply the cash advance interest rate at the end of the introductory period if you're still paying off the balance you transferred.

Where to find the fees and charges for your credit card

• When you're looking at a new card, you'll find details about cash advances in the rates and fees information as well as the Key Facts Summary or sheet that's provided by banks and other lenders.
• If you already have a credit card, you can usually find these details by logging into your account or checking the product disclosure statement. Your monthly credit card statement will also show the current cash advance interest rate but won't usually show the cash advance fee unless it's been charged.

Why do banks charge more for credit card cash advances?

Cash advances are similar to short-term loans in that they provide you with funds on short notice. The cash you get can be used for anything you want, including transactions you wouldn't normally be able to use a credit card for (such as paying other debts).

This means cash advance transactions are considered a greater risk to lenders than everyday credit card purchases. So, a cash advance fee and higher standard interest rate can help lenders offset this risk by providing them with more potential profits when you use your card for a cash advance.

The rates and fees applied also discourage people from regularly using a credit card for cash advance transactions. In turn, this reduces the potential risk for lenders.

What to think about before making a cash advance

Cash advances aren't the same as purchases. As well as the fees and interest costs, here are some other key details to keep in mind:

1. 1. • Cash advance limits. Most credit cards have daily, weekly or monthly cash advance limits in place. For example, you may only be able to withdraw up to $500 a day. Or, you may only be able to access a percentage of your available credit limit for cash advances.
      • Repayments. Your credit card provider has to apply your repayments toward the part of your balance that attracts the highest interest first. Since cash advances tend to have higher interest rates than purchases, your repayments will usually go towards reducing your cash advance balance first.
      • 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 only apply to purchases. When you use your card for a cash advance, it starts attracting interest straight away.
      • Rewards. Cash advance transactions are not considered "eligible" when it comes to earning rewards points or meeting a bonus point spend requirement.
      • Introductory 0% p.a. interest rate offers. Most 0% interest offers apply to standard purchases or balance transfers, so cash advance transactions are generally not eligible for the promotional rate of interest.

Alternatives to cash advances

If you want to avoid the extra fees and high interest rates that come with using your credit card for a cash advance, you can consider the following options:

1. 1. • Debit cards. Using your debit card to withdraw money from your bank account won't attract cash advance fees. In fact, it's likely to be fee-free if you stick to your own bank's ATM network.
      • Direct bank transfers. If you need to make a payment straight away, you could consider a direct transfer from your bank account. This allows you to pay anyone using your own money instead of funds from your credit card, which means you won't be charged interest or a cash advance fee.
      • Loans. If you need extra funds, you may also want to consider getting a payday loan or a personal loan to cover the costs. These options could have lower interest rates than credit card cash advances. Plus, some short-term loan issuers can give you access to approved funds on the same day or by the next business day.

While credit card cash advances can give you quick access to cash, the costs involved usually 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. And if you still think you may use your credit card for a cash advance, you may want to compare credit cards with low cash advance rates to see if there is an option that will work for you.

Frequently asked questions about cash advances

• If I have a cash advance debt on my credit card, can I transfer the balance to a new card?

  Yes, you can transfer this debt to a balance transfer credit card and take advantage of an introductory interest rate, providing you meet the card's eligibility requirements and are approved by the issuer. Just be aware that you'll still need to pay off the balance – ideally during the introductory period so you can reduce or avoid more interest charges.

• 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.

• If I use my credit card to withdraw cash from an ATM, would I have to pay ATM fees as well?

  You usually won’t have to pay ATM fees if you use an ATM that belongs to your financial institution or a partnered ATM network. But if your credit card charges ATM fees or you use a third-party ATM, this will be an extra cost when you use your credit card for an ATM cash advance.

• Does using my credit card at a newsagency count as a cash advance?

  While newspapers and stationery would be everyday purchases, most credit card providers would classify buying lottery tickets or scratchies as cash advances on your credit card. This is because lotto and other forms of gambling give you a cash equivalent, rather than a tangible item like a newspaper.

  And if you tried to buy your lotto ticket with a credit card that doesn't allow gambling – and the merchant has correctly classified your purchases as a gambling transaction – the transaction would be declined.

Written by

Amy Bradney-George

Editor

Amy Bradney-George was the senior writer for credit cards at Finder, and editorial lead for Finder Green. She has over 16 years of editorial experience and has been featured in publications including ABC News, Money Magazine and The Sydney Morning Herald. See full bio

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