RateCity
Aussies waste $2b on credit card cash advance fees and interest
June 29, 2011
Australians withdrew almost $11 billion in cash advances using their credit cards in the year to April, and paid $2.15 billion interest for the privilege, according to Reserve Bank of Australia (RBA) data and RateCity research. But what many credit card holders may not realise is that you may also be paying a hefty fee to withdraw cash from your bank's own ATM network using your credit card.
Two-thirds of personal credit cards monitored through RateCity charge this fee, which averages at $2.54 and ranges up to $5 per credit card cash withdrawal. The fee is added to your balance, so you may be paying interest on this too.
For those that are being hit with this fee, you're paying an extra 77 basis points to your interest rate, on average. That means the real cash advance interest rate is averaged at 20.21 percent.
RateCity CEO Damian Smith says he is surprised at the huge amount of money being withdrawn using credit cards each month.
"The cost of using credit cards to withdraw cash has increased, as RateCity found the flat fee is 2 percent higher compared to the previous year from $2.48 to $2.54," he says.
The upside
The good news is that the number of cash withdrawals and the amount of money card holders withdrew has decreased.
The number of credit card advances fell 6 percent, or by 1.62 million, year-on-year, and we reined in spending by 4 percent less or $473.7 million. The RBA recorded 27.5 million credit card cash advance withdrawals in the 12 months to March 2011.
"It's great to see that credit card users have begun to realise the high price of using their credit cards to withdraw cash. But there are still too many Australians relying on their credit cards for extra cash," Smith says.
Other options
While many Australians may see a cash advance on their credit card as a last resort, there are a number of other more affordable ways to readily access cash. Personal loans, for instance, have an average interest rate of around 10 percent.
"More Australians need to get on top of their finances and use comparison websites like RateCity to help them switch to better deals, consolidate their debts and save on interest and fees," Smith says.
But if you still intend to withdraw money from your credit card, then compare credit cards online by cash advance and purchase rates and other features.
Some of the top credit cards for cash advances available through RateCity include Community First Credit Union's Low Rate Visa Credit Card with an interest rate of 10.49 percent on purchases and cash advances and a cash advance fee of $1.50. Or MECU's Low Rate
Visa Credit Card is a cheaper option than many with a purchase and cash advance rate of 10.74 percent and a $3.50 fee for cash withdrawals.
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