How much does a cash withdrawal on a credit card cost?
Using your credit card to receive cash can sometimes be hazardous to your wallet. Cash advances cost a pretty penny. It is important to understand the ramifications of using the convenience so you are fully aware of the fees associated with the transaction.
Changes For Your Benefit
Ever since March of 2009 in Australia, ATM owners are required to disclose all of the fees associated with a transaction before the customer is able to finalise it. This is a good thing for the consumer and can also be quite revealing. As a result of the change, consumers only made 280 million withdrawals in 2009. This is compared to 342.2 million withdrawals over the same period in 2008. That is a drop of 18%. Consumers like being told what they are being charged and they are taking action. Such action was shown in the number of bank owned ATM withdrawals. When a customer uses an ATM, there is a $2 fee that is assessed if you use a machine that is not associated with your bank. The only way to avoid this fee is to make withdrawals from a machine that your bank owns. In 2009, a study from the Reserve Bank of Australia showed that there was a 10% increase in customers using their own bank’s ATMs. So, the easiest way to avoid having to pay this $2 fee, customers should only seek out ATMs from their own bank.
How much does my cash advance cost?
Overseas cash advances – Prepare when you travel
Cash advances could cost more if you’re on a trip abroad and you use a foreign ATM machine. You’re usually charged a fee from your bank in addition to the actual ATM machine fee. This can add up. One way to prepare for this is to take out more cash at one time, thereby making fewer transactions – this can save you a lot of money in fees.
Why do cash advances cost more?
You should understand how credit card companies set up their distribution of customer payments so you’re fully aware of exactly where your payments are being applied. Prior to July 2012, when customers made a payment on their credit card, the payment was first applied to the balance that carried the lowest interest rate first. This obviously cost customers a lot in interest, because since cash advances are typically charged a much higher rate than purchases, these balances wouldn’t come down until all other balances with lower interests rates were paid in full first.
The introduction of the credit card reforms in 2012 means that has been flipped, so high interest balances are paid first. One way cash advances still do end up costing more is in the fact that unlike a regular purchase, the interest on a cash advance is charged from the day of purchase. In other words there are no interest-free days on a cash advance. This, in addition to the fees you need to pay are just some of the reasons why you should always be careful when getting cash from a credit card.Back to top