What is a cash advance? Definition of credit card

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Most credit cards give you the option of getting cash or a cash equivalent using your account. Known as cash advances, these transactions often incur a higher interest rate than purchases, in addition to being subject to a cash advance fee. Cash advances also come with other restrictions, such as the inability to qualify for interest-free days or reward points.

Here you will learn more about credit card cash advance transactions, including examples of payments that can be defined as “cash advances”, how to check the applicable rates and fees, and what to think about before. to use your card for cash payment. advance.

What is considered a cash advance on a credit card?

Credit card providers have individual transaction terms that they define as “cash advances.” Here are some examples of transactions that can be classified as cash advances and result in the rate and fees for cash advances.

The 5 most common cash advance transactions

  • ATM withdrawals and withdrawals. Using your credit card to withdraw money from an ATM or cashier is a cash advance. Additional charges may also apply if you use your credit card at an off-network ATM.
  • Gaming operations. Buying lottery tickets and scratch tickets, placing bets and paying for games of chance in a casino or online are considered cash advances. Don’t be surprised if you also have to pay the cash advance rate even on the money you spend on eating and drinking at a casino. Check out our guide to which credit cards you can and cannot gamble with.
  • Gift cards and prepaid cards. Most issuers view the purchase or load value on a gift card or other prepaid card as a “cash equivalent” transaction subject to the cash advance charge and interest rate.
  • Credit card checks. Some credit card issuers send checks to cardholders that they can use to withdraw money from their accounts at will. While using such checks can be tempting, you might want to reconsider to avoid the cash advance rate.
  • Purchase of foreign currency. Using your credit card to buy foreign currency or travelers checks is not a good idea, as such transactions attract the cash advance rate on your card. Instead, if you are going abroad, you should look for a card specifically designed for travel.

Other transactions that can be defined as cash advances on your credit card

  • Bill payments. Many credit card providers classify some or all of the bill payments as cash advance transactions. This could include government fees such as ATO payments, utility payments, and some BPAY payments. Check with your issuer and the company you’re paying to see if your transaction will qualify as a cash advance.
  • Balance transfers. A number of Australian credit cards come with balance transfer offers, giving cardholders the opportunity to save money in the form of interest. In most cases, unpaid debts from balance transfers begin to attract the card’s cash advance rate at the end of the promotional period.
  • Transfers between accounts. When you use your credit card account to transfer funds to another account, either your own or someone else’s, your card issuer will treat it as a cash advance. A good way to avoid paying interest on such transactions is to use your debit card instead.
  • Buy cryptocurrency. If you have a credit card that allows you to purchase cryptocurrency, it will be considered a cash advance transaction.

If you often use your credit card to make cash advances, you may want to consider credit cards that charge the same interest rate for purchases and cash advances. While you will still have to pay the cash advance fee, these types of cards make it easier to track interest charges and sometimes offer lower rates than other credit cards.

Where can I find the cash advance fees and charges for my credit card?

Most credit card issuers will charge both a cash advance fee and a cash advance interest rate for applicable transactions. Details of the cash advance interest rate are also included in the “Summary of Key Facts” that credit card issuers should provide when considering a new card.

If you already have a credit card and want to know what you will be charged, you can usually find these details in the product disclosure statement or the terms and conditions under “fees and charges”. But if you are not sure or cannot find this information, contact your credit card issuer to confirm the applicable rates and fees before choosing a credit card or using one for cash advances. .

Compare credit cards with low cash advance rates


What else should I consider before getting a cash advance?

If you plan to use your credit card for cash advances, ask yourself the following questions to help keep costs to a minimum:

  • Will you earn reward points? Typically, you won’t earn reward points for cash advances unless a credit card comes with some sort of promotional offer.
  • What are the conditions for a cash advance when traveling abroad? If you want to use your credit card for overseas cash advances, keep in mind that ATM fees and international transaction fees could make it even more expensive. But if you still want that option, you can look for cards that offer lower foreign transaction and currency conversion fees.
  • What are the other options? If you want to use your credit card, see if there’s a way to make a purchase instead of a cash advance. For example, if you can pay with your card instead of cash, you won’t need to withdraw money from your account. You can also use your debit card, consider getting a personal loan, or ask your bank if they can provide you with a line of credit or an overdraft facility.

Credit cards are generally not designed to be used as an ATM card. So, if you think you will be making regular cash advances, you might want to consider another option to avoid accumulating high fees. Either way, be sure to read the terms and conditions before applying to make sure you don’t run into any nasty surprises when you get your hands on the card.

Frequently Asked Questions

Is there a limit to the amount I can get as a cash advance?

Expect your credit card to come with minimum and maximum cash advance limits. The minimum could be around $ 20 and the maximum would depend on your card’s credit limit and the discretion of your card issuer.

What is a cash advance?

Your credit card issuer may charge a fixed dollar value or a percentage of each cash advance as a cash advance fee. This normally applies to all withdrawals, transfers and cash equivalent transactions at ATMs.

Does using my credit card at a news agency count as a cash advance?

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

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

I used my new credit card for purchases and cash advances. Can I pay off the cash advance balance first?

As a rule of thumb, your credit card issuer should allocate your payments to the most attractive amounts first. Since cash advances typically attract higher interest than purchases, you can expect your payments to automatically go toward the cash advance balance first.

Images: Shutterstock

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