These days, carrying a credit card is as important as having your phone or house keys. Whether here in Singapore or overseas, using your credit card on a daily basis for purchases and services is a norm. You get great rewards and promotions with the convenience of not having thick wads of cash in your wallet.
However, there may be instances where some cash on hand is useful. And when you can’t access your money in your savings account, using credit cards to get cash advances is one option you can use for money. All you have to do is simply go to an ATM and withdraw with your credit card.
There’s no denying the usefulness of convenience in the face of an emergency, but the devil might be in the details. So in the interest of safety, it’s important to learn more about using credit cards and cash advances to make sure you’re aware of all its pros and cons.
What is a credit card cash advance?
You may be wondering: ‘why get physical money instead of making payments and purchases with a credit card?’ The fact is, not every establishment lets you complete a transaction with credit cards. A lot of places, like hawker stalls, for example, require cold, hard cash as payment.
If you find yourself in any of these situations, you can easily go to an ATM on-site, put in your pin, access your credit card account, and get your funds. The process is simple and convenient that you wouldn’t need to have cash on you until you need to pay for any services or products.
How are cash advances different from using a debit card? Debit cards are limited by the funds in your bank account, while the cash advance amount cannot go over your credit card limit.
Remember: a cash advance is a loan. Instead of taking from your own money, you incur a balance. The loan itself is on a revolving basis–meaning you are charged interest as soon as you withdraw the amount.
Cost of Cash Advance from Different Banks and Credit Card Companies in Singapore
A cash advance is a loan, and just like loans, you have to be mindful of the total cost you incur by borrowing cash–banks need to earn money, after all.
In particular, there are two numbers you have to be mindful of when getting a cash advance from credit card companies and banks: fees and interest rates.
|Bank||Cash Advance Fee||Interest Rate|
|HSBC||5% or S$15 (whichever is higher)||24% APR, charged daily|
|Maybank||5% or S$15 (whichever is higher)||24% APR, charged daily|
|American Express||5%||24% APR, charged daily|
|ANZ||5% or S$15 (whichever is higher)||28% APR, charged daily|
|Standard Chartered||6% or S$15 (whichever is higher)||24% APR, charged daily|
|UOB||6% or S$15 (whichever is higher)||28% APR, charged daily|
|DBS||6% or S$15 (whichever is higher)||28% APR, charged daily|
|OCBC||6% or S$15 (whichever is higher)||28.92% APR, charged daily|
|CIMB||6% or S$15 (whichever is higher)||28% APR, charged daily|
|Citibank||6% or S$15 (whichever is higher)||29.9% APR, charged daily|
Risks and Benefits of Cash Advances from Credit Cards
Credit cards are very useful financial products for day-t0-day use, and we’ve established that getting a cash advance has its uses. However, it certainly has its hang-ups that we should always consider, as is the case of dealing with anything that involves money.
Consider the risks and benefits as listed below:
Cash advances give you the benefit of a convenient source of physical cash when paying for services and purchases that would otherwise keep you from using your credit card. Withdrawing from your account is easy, and you wouldn’t need to carry cash as long as there’s an ATM in the area.
2. No application
Unlike most loans and financial products, you need to go through an application and approval process to get the money you need. Cash advances are readily available–once you apply and get approved for a credit card, you can easily get a cash advance.
1. High interest
Cash advances from credit cards have staggeringly high interest rates. Even the best rates from the best credit cards still charge you 24% APR at the minimum, with respect to the given table above. Moreover, the interest charges begin the second you get a credit card cash advance.
It’s important to repay your credit card at the next payment date, or as soon as possible.
2. Small amount
A cash advance cannot go beyond your set credit limit, meaning you are likely limited to smaller purchases, unlike other loan options which can be significantly higher.
3. No rewards
While credit cards are known for rewards and promotions, a cash advance is not considered a purchase and therefore does not give you reward points.
4. Additional fees
Credit card companies don’t just earn money from interest charges, they also charge you different fees. No matter which bank you choose, you will have to pay an upfront amount of 5% to 6% (or $15) of the balance, in addition to the annual fee that you may have from your credit card.
5. May impact credit score
Just like most financing options, failing to repay your balance on time will likely affect your credit score. Click here to find out how you can achieve a high credit score in Singapore.
What you should consider before taking out a cash advance
Using even the best credit cards for a cash advance still has its hang-ups. Consider these factors before taking out one.
1. Credit Limit
A cash advance counts with your credit limit. It is generally unwise to go beyond your limit, and the remaining amount might be better left there to pay other expenses.
2. Cash Advance Fee
Consider the different charges you will incur from getting a cash advance as it can contribute to the total cost. You will have to make a minimum payment of $15 for each withdrawal.
3. ATM fees
While it may not seem much, it’s important to keep in mind that each use of an ATM from most banks will incur a fee that may not be so negligible once they add up.
4. Higher Interest Rates
Even the best credit cards charge a steep interest rate for a cash advance. Keep in mind the amount you have to pay because of interest, because they can rack up to a high amount after a short period.
Are there alternatives to cash advances?
A HELOC or home equity line of credit allows a homeowner to take out a line of credit against their home equity. HELOCs have repayment periods as long as 20 years and are on a revolving basis.
Interest rates on HELOCs also range around prime plus 2%.
A personal loan is an unsecured loan that comes with interest rates lower than that of credit cards. You interest each month along with fixed monthly instalments at a set date.
While you still need to apply and visit a financial institutions to get the money, personal loans also boast instant disbursal of larger amounts that likely makes it a better option than a cash advance.
Family and friends
When all else fails, you can request financial help from family and friends. Interest and payments can be more lenient compared to loans and credit cards, depending on your discussion with the person who provides financial assistance, but since borrowing large amounts is generally frowned upon, your options might be limited.
More on Cash Advances
1. Is cash advance a bad idea?
A cash advance is not the BEST idea, but it is certainly an option especially for emergencies. It is however not recommended to get a cash advance regularly because of the high interest rates.
It might be heavier for your pocket in the physical sense, but having a set amount of dollars in your pocket will be lighter on your finances.
2. Does a cash advance have a grace period?
No, it does not have a grace period. Once you withdraw the money from your account, you’ll be incurring interest daily. Paying as soon as possible is the recommended option.
3. What bank allows cash advance?
You can get a cash advance at just about every bank that offers credit cards.
4. What happens if I cash advance?
When you make a cash advance at an ATM, the amount will be charged on your credit card account much like a purchase, which then incurs interest. You can then withdraw the given amount from the machine for your personal use.
While certainly convenient, using a cash advance is a dangerous risk for its high rates. Limit your usage only for big emergencies where you don’t have a debit card or any other alternative, and keep in mind all that cost that comes with it.
- A cash advance does not have a grace period. Always pay as soon as possible.
- Even the best credit cards have high interest rates.
- Before getting a cash advance, always ask yourself if the total cost is worth the emergency.
- Consider overdrawing your checking account instead. A single big fee might be preferable to a large interest rate that is charged daily.
- Simply put, a credit card cash advance is a short-term loan you can get with credit cards by going to an ATM.
Lastly, if the expense can wait for a few hours to a day, consider a personal loan instead. Instant Loan can help provide a curated list of financial institutions with the best terms appropriate for your current situation. Request for free quotes today!