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There were a whopping 15,750,456 personal credit cards on issue in Australia in February 2023 and 988,553 credit card cash advances made, according to RBA data.
But while many people are using their credit cards at the ATM, it’s really important to understand the costs of doing so. The fees and interest on an advance will generally be much more than the cost of withdrawing cash from your regular savings or transaction account.
Related: Best Credit Cards for Australians
What Is a Credit Card Cash Advance?
Essentially a cash advance is an advance on cash from your credit card account, which is different to withdrawing it from your own deposit account.
As mentioned above, using your credit card at an ATM is one type of credit card cash advance.
But this isn’t the only kind, and it is important to check the terms and conditions of your card provider to understand what they define as a credit card cash advance.
Credit card cash advances may also include:
- Cash withdrawals at a point of sale
- Transfers from your credit card account to another account
- Cash equivalent purchases, such as money orders, gift cards or foreign exchange
- Transactions for gambling purposes
Related: Guide to Credit Cards
Fees and Interest
It is important to check the terms and conditions of your credit card, as credit card cash advances will attract a fee and you will also have to pay interest on the transaction from the day of the advance—i.e. there is no interest-free period.
The fee is usually a set amount or a percentage (whichever is greater) up to a limit. For example, Commbank charges $3 or 3% of the transaction amount (whichever is greater)—up to a maximum of $300. Even if your account is in credit you will still be charged the $3.
You will also be charged interest, and with many credit card rates for cash advances more than 20%, it’s a steep price to pay.
Related: Guide to Interest-Free Credit Cards
Do All Credit Cards Allow for Cash Advances?
Most standard credit cards will allow for cash advances but interest-free credit cards, or balance transfer credit cards, will not permit cash advances during the interest free period.
An interest-free credit card is your basic credit card that usually comes with a limit and monthly fees: NAB, for example, offers the NAB StraightUp Card and Westpac has the Flex Card.
Essentially they are cards you use to get your balance under control during an interest-free period and are not for racking up more credit card debt. You can read more in our guide to balance transfer cards
Pros of Cash Advances
A credit card advance can get you out of trouble in an emergency and they are better than payday loans. But the fees are steep, so if you do have to use this facility make sure you can pay it back sooner rather than later.
Many credit card providers allow you to block cash advances if you are worried you might use your credit card for cash when you really shouldn’t. Just call your provider or you may be able to block it yourself via online banking.
Cons of Cash Advances
Most cards have limits on cash advances and, as outlined above, the fees are much more expensive than a normal withdrawal at an ATM—as is the interest rate.
CommBank’s low rate credit card, for example, has an interest rate of 13.24% on credit card purchases but a rate of 21.24% on credit card cash advances. The Westpac Low Rate card has a 13.74% rate on purchases but 21.49% rate on cash advances.
Ultimately, cash advances are an expensive way to access money and should only be used in an emergency and when you are able to pay it back within a matter of days.
Frequently Asked Questions (FAQs)
How much money can I withdraw from an ATM as a cash advance on my card?
This will depend on your credit card provider and it may also depend on your institution’s risk assessment of you. But daily limits are usually around the $1,000 to $2,000 maximum mark. The ATM may also have a limit.
What is the fee for using credit card cash advance?
It depends on the provider but if it were $3 or 3% of the transaction amount (whichever is greater) up to a limit of $300 then a withdrawal of $300 would cost you $9. There is also interest applied on top of the fee, which is usually much higher than interest charged on standard purchases.
Is it bad to take a cash advance on a credit card?
A cash advance on a credit card will usually be expensive. It won’t directly impact your credit score but it should only be used in an emergency and if you are 100% certain you can repay it quickly.
