Cash is king – especially if you’re in a tight spot and need access to it quickly. If you have a credit card, you may need to use what’s known as a cash advance. However, take time to think before you withdraw this money.
We hope this article will help you understand the true nature of this transaction before obtaining a cash advance with a credit card.
A credit card cash advance allows you to borrow money from your card issuer by withdrawing cash directly from an ATM. Apart from ATMs, balance transfers, money orders and credit card checks are also considered cash advances.
Admittedly, cash advances are convenient for the user, as they can get the money instantly and, on rare occasions, this option can be cheaper than a quick loan. Apart from that, the practice can be harmful if you do it regularly.
This cost is rarely discussed in detail, and the following section will give you an idea of the real cost of using a cash advance.
Many people equate obtaining a cash advance from a credit card with withdrawing money from a debit card, but there are distinct costs specific to cash advances that really highlight their nature.
When examining the actual costs of a cash advance, consider the following:
Compared to a traditional credit card,interest on a credit card cash advance is accrued almost immediately after you make the transaction. As a result, the interest is higher than the usual credit card interest.
The average credit card charges 19.99% on interest carried over from one period to the next. Interest rates on cash advances can reach 22.99% or more.
Even if the credit card issuer differs, the surcharge policy remains the same. Credit card cash advance fees can be calculated on the basis of a fixed amount per cash advance or a percentage of your transaction. And don’t forget that ATMs can sometimes have additional fees!
Cash advances do not offer a grace period (usually 21 days) during which no additional interest will be charged if you pay your balance by the due date. In the case of a cash advance, you will be charged interest from the transaction date until your balance is repaid in full.
After a cash advance, you’ll still need to make minimum monthly payments on your credit card. At Quebec, minimum payment laws are strict: you must pay at least 4% of your balance or $10, whichever is greater.
We’re big fans of using credit cards to earn rewards for everyday purchases. When you use cash advances, you’re actually hurting your ability to earn rewards points. Cash advances are not considered an eligible transaction by rewards programs.
Cash advances are rarely recommended as a viable option. In fact, the only time to use them is when you’ve really exhausted all your options.
Here are a few ideas you can use before resorting to the cash advance option:
Emergency funds are aptly named as they help you cover unexpected expenses in an emergency. Think of it as your first line of defence before considering going into debt to get out of a situation. Generally, you should allow 3 to 6 months’ expenses. Once you’ve used it up, you can replenish it permanently, interest-free!
Before taking out a cash advance, you can also take advantage of a less expensive option called a line of credit. This is another form of credit that lets you borrow for whatever you want. The advantage is that the interest rate is nowhere near that of a cash advance, making it a more attractive option.
An overdraft gives you access to more money than you have in your account. Let’s say you have $300 in overdraft protection. If you needed to buy something that cost $50 and only had $25, your account would end up at -$25, but you’d avoid the insufficient funds fee. Monthly fees are associated with overdrafts, but it’s a safer option than cash advances.
Now that you know what a cash advance is, you may still be tempted to use it for personal reasons. If you’re going to use it, you might as well find a few options with as little financial damage as possible. Here are some great credit card options with low cash advance fees:
Alternatively, you can also turn to balance transfer offers, such as this one from CIBC (for the CIBC Select Visa* Card) or this other balance transfer offer from MBNA (for the MBNA True Line® Mastercard® credit card).
The CIBC Select Visa* Card is one of the best balance transfer Visa credit cards in Canada.
With this exclusive digital offer for this CIBC balance transfer credit card, you get :
You’ll only have to pay a 1% fee when you transfer your balance from another card. Once this promotional period ends, the standard card interest rate of 13.99% will apply to any remaining balance. This interest rate is lower than the rates charged by many other credit cards.
For example, you could pay for major purchases on another credit card (such as renovations, furniture or appliances) and transfer your balance to the CIBC Select Visa* Card to benefit from its 0% interest rate on balance transfers for ten months.
CIBC Select Visa* Card users can also save on gas thanks to the card’s partnership with Journie Rewards, which allows them to save up to 10 cents per litre at participating service stations.
The CIBC Select Visa* Card has an annual fee of $29 (with a two-year annual fee rebate) and requires an annual family income of at least $15,000 to qualify. Despite its lack of additional benefits, the CIBC Select Visa* Card comes with up to $100,000 in Common Carrier Accident Insurance and allows users to add up to three authorized users at no additional cost.
The MBNA True Line® Mastercard® credit card is one of Canada’s best options for a low-cost balance transfer. It’s ideal for reducing interest charges and consolidating your debts onto one card.
With this card, you benefit from a 0% interest rate for 12 months on balance transfers made within 90 days of account opening. Transfer fees are a competitive 3%.
This card offers fraud protection, guaranteeing the security of your transactions.
If you want to transfer balances from high-rate cards, the MBNA True Line® Mastercard® credit card allows you to benefit from a 0% rate and pay off your debts at your own pace without high-interest charges during the promotional period.
In short, the MBNA True Line® Mastercard® credit card is an excellent choice for reducing debt and optimizing balance transfers.
The BMO Preferred Rate Mastercard is a Bank of Montreal credit card that offers:
There is no minimum income requirement for this BMO credit card.
You can use this low-interest credit card at Costco because it is a Mastercard credit card.
Finally, you’ll receive insurance on purchases charged to your BMO Preferred Rate Mastercard.
Scotia Value Visa Card is one of the best credit cards for cash advances (including balance transfers) in Canada.
You can get an introductory interest rate of 0.99% on cash advances for the first nine months (including balance transfers, with a 2% transfer fee). You pay no annual fee for the first year with this Visa credit card.
What’s more, this Visa credit card offers a low interest rate: 13.99% on purchases, balance transfers and cash advances.
For a limited time, benefit from an annual fee waiver for the first year. Additionally, receive $70 cash back by making at least $5,000 in net purchases during this period. The offer ends on February 27, 2025.
National Bank Syncro Mastercard is a low-interest credit card from National Bank. It offers an interest rate of 9.45% for purchases and 13.45% for cash advances and balance transfers.
Since it is a Mastercard credit card, you can use the National Bank Syncro Mastercard at Costco. Finally, it offers you insurance for your purchases.
Getting a cash advance from a credit card is expensive and can hurt you financially in more ways than one. They should be avoided except as a last resort, but it’s up to you to decide whether or not to use this option.
At least you’re informed and can decide whether or not it’s right for you. If you have to resort to a cash advance, it may be a sign of a larger financial problem requiring budgeting and financial discipline. Don’t be afraid to talk to a professional; get help when you can!
Yes, it is possible to withdraw cash with a credit card in Canada using an automated teller machine (ATM) or by requesting a cash advance at a bank teller. However, this involves high fees and higher interest rates than for regular purchases.
To transfer money with a credit card in Canada, you can use the balance transfer service to another credit card account. You can also use third-party services such as PayPal, which allow you to send money using a credit card, but this usually involves high transaction fees.
A cash advance on a credit card allows cardholders to withdraw cash from their credit limit. This option is usually accompanied by high fees and a higher interest rate than that applied to regular purchases, with interest accruing from the transaction date.
Savings are here: