Compare cash advance credit cards

A cash advance feature allows you to access cash using your credit card. With a cash advance credit card, it’s possible to withdraw cash at an ATM or a bank branch. This could be a convenient solution for when you need urgent cash but don’t have enough in your transaction account. But it’s important to understand that the interest rate on cash advances is typically quite high, making it much more expensive to use your card to withdraw cash than use it to pay for purchases.

Unlike a debit card that utilises funds from your bank account, a cash advance withdraws funds from your pre-approved credit limit. It means that when you use a cash advance facility, you’re essentially borrowing money, which incurs interest and potentially other fees.

Apart from higher interest rates, you’re also charged a cash advance fee each time you withdraw money using your credit card. Furthermore, unlike credit card purchases that may offer interest-free days, cash advances generally start accruing interest immediately from the day of the transaction.

Apart from credit card cash withdrawals, some other transactions may be regarded as cash advances, such as:

• Purchasing cryptocurrency
• Using your card to pay for gambling purchases, including a lotto ticket
• Paying bills through BPAY using a credit card when the biller doesn't directly accept credit cards
• Using your credit card to transfer money to your transaction or savings account
• Buying a prepaid gift card

A cash advance credit card typically allows you to withdraw cash from your credit card. They’ll most likely charge a cash advance fee to help cover the cost of borrowing this money from your card issuer.

It works in the same way as using a debit card to withdraw cash. However, the cash is withdrawn from your credit limit, not your bank account balance.

Interest on a cash advance credit card may vary between card issuers, but, in general, you’ll find the cash advance rate is much higher than the purchase rate on a standard or low rate credit card. You'll typically see two interest rates associated with cash advance credit cards:

• A standard purchase rate that you pay on your regular shopping with the card.
• A cash advance interest rate, which is typically much higher than the average purchase rate on a credit card. Some card issuers have cash advance rates that exceed 20%.

Most cash advance credit cards carry higher interest rates than other credit cards. Some can reach up to 27%. These cards can also charge a fee for the privilege of taking out cash using the credit card.

Cash advance fees are normally between $2 and $10. Some lenders do not charge dollar amounts, however, and instead charge the fee as a percentage of the amount you withdraw, ranging from 1 to 10%. You may also pay an extra fee for withdrawing cash from an ATM not part of your card network or when you use your credit card to withdraw cash overseas as you would with a transaction account. 

If you're considering a cash advance credit card, consider determining how interest is calculated on cash advances. Most card providers don't offer any interest-free period for cash advances. This means that interest will be charged as soon as you complete the cash advance. In contrast, if you make a purchase, many credit cards will offer a certain number of days to repay that amount before charging interest. However, the exact terms and conditions may vary between card issuers, and it's essential to read the Product Disclosure Statement carefully to avoid any nasty surprises. 

A cash advance should typically be considered a last resort due to the higher interest costs and fees. Using your debit card to access your savings rather than withdrawing cash through your credit card could help you avoid hefty cash advance fees. Another option you could consider if you need a large amount of money that you don’t have in your savings or transaction accounts is applying for a personal loan. This will likely cost you less than using a cash advance facility. 

If you’re wondering how much does it really cost to withdraw cash from your credit card? We’ve created a scenario with some calculations, including an example interest rate that may apply to the cash advance. This scenario is completely made up, and you’ll need to check the rates and fees of your credit card for more accurate calculations for your circumstances.

In this scenario:

Consider you owe your friend $1,000, which you need to repay within the week, but you don’t have the available cash in your transaction or savings account. You decide to use the cash advance feature of your credit card and take the cash out of your credit card at an ATM to repay them. 

Assuming your cash advance rate is 22.24%, the ATM fee is $2.50, and the cash advance fee is 1% of the amount withdrawn. Now if you can also repay the amount, in full, in 20 days, here's an approximate calculation of how much extra you'll end up paying:

This means you will pay $24.69 to borrow $1,000 for 20 days. Even though this amount may seem insignificant initially, this amount is based on the presumption you repay the amount within 20 days. If you fail to repay the amount within that 20 days, you’ll continue to accrue interest, and this will increase the amount substantially, and it can add up fast.  

Cash advance transactions are not recorded separately on your credit report and don't directly impact your credit score. However, if you're not careful, cash advance costs could add up quickly and lead you to accumulate debt. This accrual of debt can have a negative effect on your credit score. Furthermore, missing a repayment on your credit card could be recorded on your credit file, potentially lowering your credit score.

• Interest rates: Cash advance credit cards can often charge interest rates above 20%, which is a costly form of borrowing compared to others. Make sure to compare both purchase and cash advance rates to find a card that meets your requirements.
• Additional fees: As well as being charged a cash advance fee, you may also be faced with annual fees, foreign exchange fees or other charges, so ensure you check them all.
• Cash withdrawal limits: Your credit limit is not always your cash advance limit. So make sure to check how much cash you can withdraw from your credit card before you apply.
• Rewards and benefits: Some credit cards offer reward points or other freebies on your purchases using the card. Even though rewards-based credit cards may charge a higher annual fee than standard credit cards, you may want to compare the extras and see whether they offer any additional value. You should also check if these rewards are earned on cash advances as well as purchases or just on purchases.

Applying for a cash advance credit card is similar to applying for a standard credit card. 

Before you apply, you’ll want to look at the different credit card issuers and what they offer, especially things directly linked to cash advances. Take the time to research the different types of credit cards and compare features like interest rates, credit limits and any other benefits or rewards associated with the card. This will help you find a credit card that best fits your spending pattern and requirements. 

Additionally, remember to check for any minimum income criteria you may need to meet for specific cards. For example, some premium credit cards may have income thresholds to ensure that you can comfortably afford the card you are applying for. As the borrower, you are responsible for reviewing the eligibility criteria of various credit cards and verifying that you meet the requirements. Doing so could help increase the likelihood of your application being approved.