Understand the Costs of Cash AdvancesAlternatives with Your Credit Card

Cash Advances: Understanding Their Costs and Alternatives

In , we delve into the concept of cash advances with credit cards, their implications for your finances, and strategies to avoid them to save costs. A cash advance is typically understood as using a credit card to withdraw money from an ATM or bank branch directly. However, it encompasses other transactions that might not be immediately apparent but still classify as cash advances. Understanding these nuances can help you prevent incidental cash advances and protect your financial health.

What Are Cash Advances?

A cash advance is generally defined as any transaction made using a credit card for the following purposes:

1. Withdrawing cash via ATMs, EFTPOS terminals, or over-the-counter at banks or financial institutions excluding withdrawals linked to everyday bank accounts.

2. Purchasing gift cards, prepd cards, foreign currency, traveler's checks, wire transfers, money orders, or gambling chips.

3. Transferring avlable credit from your credit card account to another account held with the same institution.

It's essential to familiarize yourself with these categories since not all transactions might be flagged as cash advances by default.

Costs Associated With Cash Advances

The primary differences between using a credit card for regular purchases versus cash advances lie in fees and interest rates. Here’s what you should know:

1. Cash Advance Fee: Some cards charge a fee upon making a cash advance, which can vary based on the card type and transaction method e.g., ANZ charges a fee for staff-assisted cash advances but not for ATM transactions. This fee is added to your cash advance balance and accrues interest along with the principal amount.

2. Interest Costs:

   • No Interest-Free Period: Unlike regular purchases, which often enjoy an interest-free period deping on your card's terms, cash advances do not typically offer this grace period.

   • Higher Interest Rate: Many cards apply a higher interest rate to cash advances compared to standard purchase transactions.

Understanding these fees and rates is crucial as they can significantly impact the cost of using your credit card for cash withdrawals.

Rewards Programs

If you have rewards-eligible credit cards such as ANZ's CashBack Visa or rpoints Visa, it’s important to note that transactions categorized as cash advances do not qualify as 'eligible purchases'. This means they won't contribute towards earning rewards points or benefits.

Alternatives to Cash Advances

To avoid the potential costs associated with cash advances:

1. Withdrawal from Your Everyday Account: Instead of using your credit card, consider withdrawing cash directly from your savings or checking account using an EFTPOS card at ATMs. While ATM fees may apply for transactions outside New Zealand, this option typically avoids transaction fees and interest charges.

2. Personal Loans: For large purchases that require immediate payment, opting for a personal loan might be more cost-effective than credit card cash advances due to lower interest rates.

3. Bank Consultation: Always seek advice from your bank about alternatives based on your specific financial needs or requirements.

Paying Off Your Credit Card Balance

To avoid accruing additional costs:

• Ensure you repay any balance in full by the due date if you wish to benefit from an interest-free period for purchases made with your credit card.

• Losing interest-free days: If you don't pay off your balance, you'll start accruing interest charges on cash advances and potentially other purchases immediately. Moreover, this could ext your interest-free grace period beyond the current statement cycle.

  to review your specific card's conditions of use for detled information about applicable fees, interest rates, and any rewards programs that may or may not apply to cash advances.

  that while provides general guidance, it is based on the information avlable as of May 2022. Always refer to your credit card's terms and conditions for accurate detls regarding fees and charges.

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