What is a credit card cash advance?
A cash advance is when you use your credit card to withdraw cash, instead of using it to pay for goods or services.
While it might seem like a quick way to access money, cash advances are typically one of the most expensive ways to borrow. That’s because they usually come with:
- Higher interest rates than standard purchases
- No interest-free period (interest is charged immediately)
- Additional fees, such as a cash advance or ATM withdrawal fee
So, if you withdraw $500 as a cash advance, you’ll likely end up paying significantly more than if you’d used your card for a $500 purchase.
Here’s a typical example to show how quickly the costs can add up…
Using your credit card for a purchase versus cash advance
| Purchases | Cash advances | |
|---|---|---|
Fees | None as standard, unless the transaction is in a foreign currency or the retailer applies a surcharge. | Usually 2-3% of the amount advanced. |
Interest rate | Varies by card, anywhere between 0% and 23% p.a. | Almost always higher than the purchase rate and sometimes much higher. |
Interest-free days | Usually 44 or 55. | None. |
Limit | You can make purchases up to the value of your credit card’s overall credit limit. | There is usually a limit on how much you can withdraw as cash from your credit card account per day (e.g. $1,000). |
Rewards points | Most purchases qualify for rewards points. | Will not earn you any rewards points. |
What transactions count as a credit card cash advance?
These are the most common types of transactions typically treated as a cash advance:
- Withdrawing money from an ATM using your card or getting cash out in a store.
- Transferring money from your credit card account to another bank account.
- Paying a bill in person at a bank or post office.
- Buying foreign currency.
- Buying cryptocurrency.
- Money spent on gambling.
- Purchasing prepaid cards (like the ones sometimes given as gifts).
- Many credit card providers also classify store gift cards as a cash advance but not all do. This is worth checking before you use your credit card to buy a gift card.
If you get a balance transfer credit card and do not pay off the balance in full during the introductory period, the card’s cash advance rate usually applies to the remaining balance.
How much does a credit card cash advance cost?
Cash advance fees
You will be charged a fee simply for using your card to access a cash advance. This is usually a percentage of the transaction value – typically ranging from 2-3% of the cash advance amount, or a flat dollar fee on small amounts.
Interest on cash advances
The interest rate on cash advances is almost always higher than the interest rate on purchases using the card. In some cases, it’s substantially higher. For example, Money.com.au analysis shows some credit cards have a cash advance rate that’s double the interest rate charged on purchases.
No interest-free days
With a cash advance, interest starts building up straight away – there are no interest-free days like with regular purchases. On some cards interest may be charged daily, so if you don’t clear the balance quickly, you’ll pay interest on the interest from the day before (compound interest).
International cash advance fees
If you make use of a cash advance while overseas (e.g. at an ATM while on holiday) you will also likely be charged an overseas ATM fee on top of everything else.
Let’s say you withdraw $500 in cash using your credit card and then make the minimum repayments allowed to clear the balance. That one withdrawal would cost you $202 in interest and fees and would take two years and 11 months to repay, Money.com.au’s analysis shows. If you repaid the balance in full after 31 days, it would still cost $24.77.
Why are credit card cash advances so expensive?
Brad Kelly, Credit Card Expert
"It comes down to risk. The minute a customer is getting a cash advance on a credit card, it raises a red flag for the bank that this customer is a risk. And the bank prices it accordingly. This is not to protect the consumers, it’s to protect the bank. There's basically a payday lending product lurking in your credit card. If you're that desperate that you need cash on a credit card, you will pay for it."
Brad Kelly, Credit Card Expert
Cash advance fees and rates compared
From Australia’s major credit card providers on credit cards that allow cash advances (not all cards do).
| Cash advance fee | Cash advance interest rate | |
|---|---|---|
American Express (only enrolled cardholders approved before 2008 can access cash advances) | $2.50 or 2% of the cash advance amount (whichever is greater), or $1.25 per withdrawal on charge cards. | 23.99% p.a. |
ANZ | 3% of any cash advance (a minimum fee of $4 applies to cash advances made outside Australia) | 21.99% p.a. |
Bank of Melbourne | 3% of cash advance amount | 21.99% p.a. |
BankSA | 3% of cash advance amount | 21.99% p.a. |
Bankwest | 3% of transaction amount or $4 (whichever is greater) | 21.99% p.a. |
Bendigo bank | $3.00 or 3% of the transaction amount (in AUD), whichever is greater | 19.99% p.a. - 21.99% p.a. depending on the card |
Citi | 3.5% of the transaction amount (minimum of $3.50 applies) | 22.24% p.a. - 22.99% p.a. depending on the card |
Commbank | $4.00 or 3.00% of the transaction amount, whichever is greater (up to a maximum of $300) | 21.99% p.a. |
HSBC | 3% or $4 of the transaction amount, whichever is greater | 21.99% p.a. |
St.George Bank | 3% of cash advance amount | 21.99% p.a. |
Suncorp | 3.5% of transaction amount (minimum charge of $3.50 applies) | 21.99% p.a. |
Westpac | 3% of the value of the transaction | 21.99% p.a. |
Virgin Money | 2.7% (minimum of $2.70 applies) | 20.99% p.a. on all cards except the low rate card (21.69% p.a.) |
How to avoid cash advance fees
1
Keep an eye out for transactions classified as cash advances
Review the terms and conditions of your credit card to understand which types of transactions your provider considers cash advances. These can include ATM withdrawals, gambling purchases, bank transfers, and even certain bill payments or money transfer services.
2
If essential, borrow as little as possible
If you must take a cash advance, keep the amount as low as possible. Since fees and interest add up quickly, borrowing only what you truly need can help reduce the overall cost. Remember, a cash advance is still a loan.
3
Pay it off as soon as you can
Repay a cash advance as soon as possible. Interest starts accruing daily with no interest-free period, making it one of the most expensive ways to borrow on your credit card. The sooner you pay it off, the less it will cost.
4
Set restrictions on your credit card
Ask your bank to place limits on your credit card to block specific transactions that may be classified as cash advances, such as gambling. This can help you avoid high fees and interest by preventing risky or unintended charges.
5
Seek support if needed
If you're facing financial difficulties and need cash, get advice before borrowing. There may be better options. Speak with your bank or contact the National Debt Helpline on 1800 007 007 for free, confidential support.
