How are credit card cash advances charged?

Credit cards can be a useful way to manage your monthly finances, spread the cost of a big payment, or get rewards or cashback for your spending.

Cash advances from a credit card can be expensive – so don't consider withdrawing cash on your card unless it's an absolute last resort.

While cash advances primarily consist of withdrawals at the ATM, there are other payments that may be considered a cash advance. These include: 

• buying Traveller's Cheques
• buying foreign currency
• gambling and betting transactions.

Withdrawing cash on your card can be expensive. Below we are six factors to consider: 

1. Compared to purchases, cash advances are usually charged a higher rate of interest. 
2. Cash advances tend to attract interest from day one. Some purchases made on your card get an interest-free 'grace' period – this can be anything from 45 to 59 days. However, no such breathing period exists for a cash advance.
3. As well as interest, cash advances attract a fee – this is typically 3% of the amount withdrawn but can be up to 5%. However, there are a few providers that do not have this charge at all.
4. Using an ATM abroad can bring an extra charge, on top of the interest and cash withdrawal fee. Foreign usage fees (charged by most cards) can be anything from 2.00% to 2.99% of the amount you withdraw.
5. Not only can you expect charges from your own provider abroad, but the local bank which operates the cash machine may include a charge too. 
6. If you make a purchase with cash withdrawn from a credit card, you don't get purchase protection. If you make a purchase using the card directly, you benefit from enhanced protection if your goods aren't delivered or don't meet the standards you expect.

If you find yourself in a situation where you must withdraw cash, try to minimise its effects by following these tips:

• If you know you may use the card to withdraw cash abroad before you apply, look for a card that doesn't charge for cash withdrawals or for foreign use. 
• Do you have to pay in cash? Wherever possible, use the credit card directly rather than paying in cash withdrawn from the card – it's far cheaper and gives you more protection.
• If you must make cash withdrawals using your card, try to take the cash in a bulk withdrawal rather than in dribs and drabs.
• Once you've withdrawn and spent the cash, try to pay off your credit card bill balance as quickly as possible. As previously mentioned, cash advances often get charged a higher rate of interest, so pay it off as soon as you can to minimise the amount of interest you'll pay. However, check with your card provider how they will allocate any payments made before a card statement is issued, as they may use the money to clear the outstanding balance from your previous statement. For example if you take a cash advance, then try to pay it off on payday before your next statement, the payment may be applied to the existing balance, not the cash advance.