Cash Advance

Credit card cash advances are one of the most expensive ways to borrow money. Unlike regular purchases, they usually come with several extra costs.

There is typically a cash advance fee, often a percentage of the amount withdrawn with a minimum charge. The interest rate on cash advances is usually higher than the rate for purchases. And interest normally starts building immediately, with no interest-free period, even if the full balance is paid when the statement arrives.

For example, withdrawing 400 with a 5% cash advance fee costs 20 straight away, and interest at the higher cash rate begins to accumulate from that day until the money is repaid.

Some transactions may be treated as cash advances even though they do not involve withdrawing cash, such as buying foreign currency, gambling transactions or some money transfers, depending on the card provider.

Because of the high costs, cash advances are best avoided except in genuine emergencies. Alternatives such as using a debit card, an arranged overdraft or a personal loan are usually cheaper.