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Cash advance credit cards

Cash advance credit cards explained

It’s possible to use your credit card for cash advances, but you should try and avoid it if you can

By Mehdi Punjwani

Published: 08 September 2020

Man using credit card to pay via a laptop

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If you need cash quickly, it’s possible to withdraw it on most credit cards.

This is known as a cash advance, but it’s rarely recommended because of the high withdrawal fees and interest payments, which usually kick in straightaway.

What is a cash advance credit card and how does it work?

As well as making purchases and transferring balances, most credit cards allow you to withdraw cash as you would with a debit card. This is known as a cash advance.

The problem is that unlike a debit card you will often be hit with a fee and interest is charged from the moment you take out the cash. This makes using a credit card for cash advances expensive, even if you clear your credit card balance every month.

It’s also not just notes and coins that may be considered as a cash transaction with a credit card. Other transactions, such as mortgage payments or utility bills, may be deemed cash transactions too. If unsure, it’s best to check with your card provider first.

Making an electronic transfer from your credit card to your current account will also incur a fee, but if you have a specialist money transfer credit card, you can at least avoid paying interest for a set period.

If you do withdraw cash on your credit card, try to clear your balance straightaway to minimise the interest you’ll pay.

How much cash can I withdraw on a credit card?

It’s likely that the amount you can withdraw in cash will be lower than your overall credit limit, which you use for purchases or a balance transfer.

For example, if you had a £2,000 credit card limit, you may only be able to withdraw £1,200 in cash.

What transactions are considered a cash advance?

As well as withdrawing notes and coins, the following could also be considered a cash advance:

  • Making a mortgage payment
  • Paying a utility bill
  • Buying travel money
  • Buying gift vouchers
  • Transferring money from your credit card to a current account

Why should I avoid taking out cash on a credit card?

Not all spending costs the same on a credit card. Taking out cash is typically more expensive than making purchases because interest is charged straightaway and then every day until you pay off your balance

There is also likely to be an additional cash advance fee for using your credit card in an ATM, for example. This could be a fixed fee or a percentage of the amount you have withdrawn.

Can I withdraw cash abroad on my credit card?

Yes, but this will probably be even more expensive because you will be hit with extra fees.

In addition to the cash advance fee and interest charges there will be a foreign usage fee and if the cash withdrawal is in British pounds and not the local currency, you’ll also have to pay a dynamic currency conversion (DCC) fee. The exchange rate won’t be the best either.

How do you get cash on a cash advance credit card?

In the normal way you would take out cash with a debit card.

You can withdraw cash from an ATM using your PIN, over the counter at a bank or by getting cashback at a shop.

However, while getting cash out isn’t difficult, you need to be aware of the additional costs you may incur.

What are the fee-free credit card alternatives?

While you will not be able to withdraw cash from an ATM on any credit card fee-free, there are credit cards that do allow you to access cash or spend on your card without paying interest. Here's how they work:

  • 0% money transfer cards: Make payment from your credit card as cash straight into your current account and charge 0% interest on the borrowing for a set period. Money transfer cards with the longest 0% terms will typically charge a transfer fee of around 3% of the debt.
  • 0% balance transfer card: Allows you to transfer an existing card debt on to the balance transfer card where you won’t be charged any interest for a set period, for example,
    12 or 24 months. There may be a one-off fee to transfer the balance.
  • 0% purchase card: Allows you to make purchases online or in-store without paying interest for a set period. 

Agreed overdraft facilities are another option if you need a smaller amount of fee-free borrowing. Some banks are prepared to offer you up to several hundred pounds of agreed overdraft, provided you pay it back in good order – often more if you’re a current student. But beware, if you go over your agreed threshold or time limit, interest rates on overdrafts can be quite steep – often reaching 40%.

Compare credit cards with MoneySuperMarket

If you’re looking for a credit card, comparing deals on MoneySuperMarket is an easy way to find a card that’s right for you. All you need to do is tell us a little about yourself, your financial status, and what you’d like to use your new credit card for, and we’ll show you a list of cards tailored to your needs.

You’ll be able to sort them by their interest rates, any included incentives and your likelihood of you being approved. Thanks to MoneySuperMarket’s eligibility checker, you can reduce the risk of having your application for credit refused.

Once you’ve found the card you want, just click through to the provider to finalise your application. If it’s accepted, your provider will send you the card through the post as well as letting you know your credit limit and interest rate – remember the advertised rate may not be the one you get, as it only has to be offered to 51% of successful applicants.

Once you have your card, you just need to activate it and it will be ready to use.

MoneySuperMarket is a credit broker not a lender. You must be 18 or over and a UK resident.

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