What is a credit card cash advance?

A credit card cash advance can seem like a convenient way to access funds, but cash advances can get expensive and it can be advisable to think carefully before using the cash advance feature of your credit card.

What is a cash advance?

A cash advance is when you withdraw money from your credit card account. For example, using your credit card to take out cash at an ATM or bank branch. When you make a cash advance, you are accessing money as you might using a line of credit.

There are a range of transactions that are typically considered to be cash advances, including:

• withdrawing money from an ATM, bank branch or store at a point of sale
• transferring money from your credit card account to your transaction account
• gambling or gaming transactions, including buying a lotto ticket (note that, from 11 June 2024, you won’t be able to use a credit card or digital currency to place bets in Australia)
• buying travellers cheques, money transfers or wire transfers
• buying a prepaid card or gift card
• buying cryptocurrency
• paying certain kinds of bills

Each provider will have its own rules around this, so it’s important to read the terms and conditions to confirm what types of transactions your provider considers to be cash advances.

What is a cash advance credit card?

There is no such thing as a specific cash advance credit card – rather, the ability to access a cash advance is a feature that is included in a number of credit cards on the market.

How much does a cash advance cost?

The cost of a cash advance depends on the cash advance interest rate and how much cash you access, plus any cash advance fee. The important thing to know is that you will be charged interest on a cash advance until you pay it off. Most providers also charge a fee each time you make a cash advance.

Interest charges on cash advances

Cash advances typically attract interest from the date of the transaction until you pay off the cash advance balance in full. This is different to interest on purchases made using your credit card, where you will usually receive an interest-free period (e.g. up to 55 interest-free days).

The interest rate for cash advances is typically higher than the interest rate for purchases, so interest on a cash advance is likely to be more expensive than for a regular purchase. Interest on cash advances is typically charged on a daily basis and will be based on your outstanding cash advance balance. This means you can be charged interest on any unpaid interest that has been added to your balance, as well as any fees and charges.

Cash advance fee

In addition to interest charges, you will also typically be charged a cash advance fee. This is usually a flat fee or a percentage of the cash advance amount – whichever is greater. The cash advance fee is charged at the time of the transaction and is added to your cash advance balance. This means you’ll be charged interest on it. Typically, credit cards will charge less for a domestic cash advance fee than for an international one.

In addition to the cash advance fee and interest, you may also be charged an ATM fee if you are withdrawing cash from another institution’s ATM.

How much money can I withdraw from an ATM with a credit card?

The amount of money available as a cash advance will depend on your credit card provider. Providers usually set daily cash limits for cash advance withdrawals from ATMs. For example, a daily limit of $1,000 per credit card. Some ATMs may impose their own cash withdrawal limits.

Is a cash advance bad for your credit?

Credit reports do not include information about cash advances. This means that a cash advance itself will not affect your credit score.

The cost of a cash advance can add up though and if you miss a repayment this can be listed on your credit report and may negatively affect your score.

→ You can check your credit score for free

Can I avoid cash advance fees?

One of the best ways to avoid cash advance fees is to avoid using them altogether. Before making a cash advance, consider whether you could use your debit card instead, or whether you have the option of making the transaction as a credit card purchase with a retailer.

If you have a low income, you may be eligible for a no interest loan of up to $2,000. The loan can be used for essentials like fridges, washing machines and car repairs.

If you can’t avoid making a cash advance, you can minimise the interest paid (and potentially the cash advance fee if it’s calculated as a percentage) by reducing the amount of money you withdraw. You’ll be charged interest from the moment you make the cash advance, so paying the balance back quickly can also help to reduce the overall cost.

Choosing a credit card with a low cash advance rate is another way to minimise interest costs. But it’s important to take more than this rate into account if you are looking to take out a credit card. Other factors such as the annual fee, purchase rate and additional features such as rewards points could also be worth considering.

Canstar compares different types of credit cards based on these factors and more. Find out which credit cards have received a 5-Star Rating.

If you’re looking for ways to help manage your finances, you might want to check out our tips on how to create a budget or try a budgeting app.

If you need help managing your bills and debt, you could also consider talking to a free financial counsellor.

Cover image source: Irina Soboleva S/Shutterstock.com
This is an update of an article originally written by Sean Callery