Most credit cards have a feature called a cash advance that enables you to withdraw money using your credit card. Usually, you can accomplish this at an ATM or in person at a bank location. Usually, there is a predetermined cap on the amount of money you can withdraw. You are drawing credit instead of using a debit card to draw money from your bank account. When you use the cash withdrawal feature on your credit card to make this credit transaction, interest will be charged.

Other transactions than using a credit card to withdraw money may also qualify as cash advances. When you use your credit card to make casino transactions, when the biller doesn’t accept credit card payments, or when you pay a bill through BPAY.

Since cash advances frequently have higher interest rates than credit card purchases, they are more expensive. Because of this, it’s important to ask your credit card company whose transactions are categorized as credit advances.

What is the cost of a cash advance on your credit card?

Despite the fact that a cash advance could be a practical way to solve a brief financial shortage, you should be aware of the additional fees you’ll have to pay. When compared to using your credit card to make a purchase, the interest rate on cash advances is frequently greater. Financial institutions may charge interest rates on cash advance transactions that are more than 20%. This is a lot higher than the typical credit card purchase rate, which ranges from 15% to 17%.

Aside from this, cash advances often don’t have an interest-free term. This implies that, unlike purchases, where you may have interest-free days where you can pay it off without being charged interest, interest is calculated from the day you make the transaction. If you come across a credit card that offers a cash advance interest-free period, make sure to look into the revert rate, which is the rate applied to transactions after the interest-free period and can be as high as 27%.

You might also be charged a fee for cash advances in addition to the interest charges, which could range from $2 to $10. Some card issuers may charge you a percentage of the entire transaction amount rather than a set cost, which could range anywhere from 1 to 10 percent.

You could occasionally be charged an additional ATM fee if you use an ATM that is not a part of the network for your card because it is owned by a different financial institution.

Your bank will charge you an even greater cash advance fee if you use your card to get a cash advance while traveling abroad. Additionally, overseas cash advance transactions will be subject to the ATM costs of the destination countries.

How much money can you withdraw with a cash advance?

The maximum amount you can withdraw with a credit card differs frequently from your credit limit. Your credit card company probably established a daily cash advance limit. This indicates that there is a daily limit on the amount of money you can withdraw. This cap, for instance, might be up to $800 or $1000 every day, after which you’d have to wait until the following day. This daily cap may occasionally be set as a quotient of your credit limit. For further details about your cash advance limit and fees, get in touch with your card issuer or review the Product Disclosure Statement.

Your credit statement will show the entire amount charged to your credit card throughout a billing cycle along with any interest that has accumulated. If you have a rewards or travel credit card, you won’t be able to earn any reward points for cash advance transactions.