Credit card cash advances create more debt

Credit card cash advances create more debt

There are many times in our lives where funds can get extremely tight. Most of us tighten our purse strings and patiently wait for sunnier days but others get caught up in temptation and turn to their credit card for cash advances. The fact is, this is a costly habit, one you should be quick to break.

Cash advance interest

A cash advance service is offered by most credit card providers and allows cardholders to withdraw cash using an ATM or over the counter. There is usually a limit on how much you can withdraw from an institution using your credit card and in most cases you’ll pay interest on your cash advance from the moment you withdraw the money. This is unlike when you make a purchase using your credit card, when you may be offered up to 55 days interest free.

Making a cash advance using your credit card can be costly and not simply because of the typically high interest rates charged for the privilege. In the year to April 2011, Australians withdrew almost $11 billion cash from their credit cards, paying around $2.15 billion in interest as a result.

Cash advance fees

What credit card holders may not realise is that when you make a cash advance, you may also be paying a fee for the service, even if you withdraw the money from your own bank’s ATM network.

Many providers charge this service fee, which is added to your credit card balance – so you may also be paying interest on this.

Alternative options

While fees have been gradually rising for cash advances, it seems that the number of cash withdrawals and the amount being withdrawn from credit cards is declining. It’s a good sign that credit card users are realising the high cost of cash advances, but there are still many Australians relying on their credit cards for extra cash.

Opting for a cash advance may seem like your last resort when you’re in need of money quickly, but there are a number of financial alternatives that you should consider before going to the ATM. Personal loans, for example, have much lower rates of interest on average compared to cash advances, so may be a cheaper option for you.

However, if you have been knocked back on a personal loan application and you’re turning to cash advances as a result, then it’s worth comparing credit cards online. RateCity compares over 200 Australian credit cards so you are bound to find one that suits your particular needs. 

 

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How to get money from a credit card

You can get money from a credit card, but generally it will cost you.

Withdrawing money from a credit card is called a cash advance, as it operates more as a loan than a simple cash withdrawal. Because it is a loan, you may be charged interest on your cash advance as soon as you make the withdrawal. Interest rates are also usually much higher for cash advances than standard credit card purchases.

In addition to the interest rate, you may also be charged a cash advance fee. This could be a flat rate, or a percentage of your total cash advance. If you are considering a cash advance, make sure to add up how much it will cost you before committing.

How do I transfer money from my Commonwealth bank credit card to my bank account?

Your Commonwealth bank credit card may include a cash advance benefit, but you won't be able to transfer money to your bank account. 

You can, however, withdraw cash from your credit card at an ATM. You should remember that you have to pay a fee for such transactions, and you’ll be charged interest from the day you withdraw the cash. 

Unlike other credit card transactions, you don’t get an interest-free repayment period for cash advances. Also, you may not be able to access your full credit card limit for a cash advance.

Can I transfer money from my American Express credit card to my bank account?

If you’re an American Express credit card customer, you may not be able to transfer money from your credit card to your bank account. However, you may be eligible for cash advances, which involves withdrawing money through an ATM. 

To qualify for a cash advance, you’ll likely have to enrol for American Express Membership Rewards. Consider checking your online credit card account to see if you can withdraw a cash advance and, if so, the fees and charges you’ll incur for this transaction. 

You should remember that cash advances are different from balance transfers, which were available with some American Express credit cards earlier. Balance transfers allow customers to consolidate debt from high-interest credit cards to a credit card offering a lower interest rate. If you only recently applied for an American Express credit card, balance transfers may not be available irrespective of the card you own. 

How to get cash with just a credit card number

Banks and merchants usually will not allow you to access cash without a physical card, because doing so would open up opportunities for fraudulent activities. Even most non-cash credit card transactions (such as shopping online) require you to know the expiry date and CVV on your credit card in addition to the card number.

However, some banks offer cardless cash for transaction accounts. Using a secure app installed on your mobile phone, you can log onto an ATM and withdraw the money you need. This could be a practical and secure solution if you don’t have a card and need cash.

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

Does ING increase credit card limits?

You may want to increase your credit card limit for many reasons, such as having access to more spending money. However, if you are using the Orange One credit card issued by ING, you may not be able to do so. 

ING customers can choose a credit limit of their preference when applying for the Orange One credit card. Depending on your financial situation, this limit can be anywhere between $1,000 and $30,000. If you qualify for a Rewards Platinum card, the minimum credit card limit will likely be $6,000. 

Ideally, you should set your credit card limit knowing how much you can afford to repay each month and keep your expenses lower than this level. With most credit cards, you should have the option of requesting a credit card limit increase at a later time, although you will need to qualify for any increase. With an ING credit card, limit increases are out of the question (at the time this was published), which means you may want to apply for a higher credit card limit from the beginning. Remember that you have the option of decreasing your ING credit card limit at a later time.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

What to consider before transferring money from your credit card to your bank account in Citibank?

You can transfer money from a Citibank credit card to a bank account depending on the available limit of each. The process is known as a cash advance transaction, and Citibank should allow you to transfer some portion of the total credit limit.

Transferring funds from a credit card to a bank account is likely to attract additional charges, so please consider the following potential costs:

  • A cash advance fee, which is a per cent of the total transfer amount
  • A 2 per cent transaction fee when you transfer money from a Citibank credit card to a bank account
  • Cash advance interest rate applicable on the transfer amount without any interest-free period.

To learn more about such transfers, you can contact the bank via the online service desk, email, or by calling 13 CITI (13 24 84).

How can I increase my Bankwest credit card limit?

When you apply for a Bankwest credit card, you get assigned a pre-set credit limit, which will end up being the most that you can spend on your credit card before having to pay it off. Your credit limit is chosen for you and your current financial situation, and you should remember not to overspend, irrespective of the limit, in order to avoid racking up a massive bill.

However, banks and lenders understand that your needs will change, and have made it possible for you to increase your credit card limit, allowing you to get extra cash when you need it most. Moreover, with a higher spending limit, you may be able to get access to certain perks and benefits with your Bankwest credit card.

To increase your Bankwest credit card limit, you can visit any of the bank’s branches or call 13 17 19 and follow the steps outlined.