credit card What is a Credit Card Cash Advance?

Cash advance is an overdraft facility on your savings account that comes in the form of cards that provide ready-to-use funds, at no cost. A cash advance is a loan service provided by your credit card issuing bank, which allows you to withdraw cash through an ATM or by a check. There is no fixed monthly repayment amount or repayment period. You can choose to repay only the minimum balance as stated on the statement or the full outstanding balance.

How does a Cash Advance Work?

A cash advance is different from that of using a debit card in an ATM. When you use a debit card, the money is automatically deducted from your account to pay for your purchase and if you don’t have enough money in your account then your purchase will be declined. Cash advance is mostly referred to as short-term loans that offer interest rates and fees higher than a regular credit card used for purchase. Each bank has different rules and features. Some allow you to withdraw cash from ATM while others send blank checks.

Pros and Cons of Credit Card Cash Advance

The ease in swiping your credit card for purchase has its pros and cons. Let us take a look at the pros and cons of credit card cash advance in detail:

Pros

  • A Credit card cash advance provides instant access to cash. You can withdraw money instantly and conveniently to any nearest ATM.
  • Some cash advance credit cards offer rewards in the form of cashback. The Cashback is a form of incentive offered by the card issuing bank to the cardholder where a specified percentage of the amount spent using the credit card is returned to the cardholder.
  • It helps to build a good credit history
  • Cash advance credit cards allow you to purchase items and pay off in monthly installments. They also offer discounts at stores and rewards. For instance, when you make a purchase using a credit card you can collect points; these points accumulated and can be used for airmiles, travel etc.

Cons

There is usually no grace period for cash advance. Interest typically begins accruing immediately on cash advances.

  • Most banks charge a cash advance fee every time you take a cash advance.
  • The interest rate charged on cash advances is typically higher than the rate for purchases. It is a very expensive short term loan.

What are the banks that offer cash advances in Singapore?

Almost all banks in Singapore offer a credit card with a cash advance option that comes up with different rates and fee structure. The interest rates and fees vary from bank to bank and from account product to product, ranging from ludicrous to the fairly reasonable. Banks offering cash advance credit card are – OCBC, DBS, HSBC, Standard Chartered Bank, and Citibank. For Instance, HSBC bank offers a cash advance fee of 5% for each transaction.

Though, Cash advances generally feature high interest rates and fees, but they are also attractive for many borrowers for their fast approval and quick processing.

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