Cash advance fees: what you need to know


Cash advance fees: what you need to know


Having a credit card can seem like an invaluable financial aid, however, people often find themselves caught out by high fees they never imagined possible when spending.

One of the main causes of this is lack of knowledge about cash advance fees.

According to research commissioned by TotallyMoney, most credit cardholders are unaware of these fees on various types of transactions. The annual Financial Awareness Survey, which was conducted by OnePoll, found that 49% of people surveyed had no idea that they can be charged for using their credit cards at an ATM.

The lack of awareness was then further cemented when the survey revealed that more than three quarters didn’t realise they were being charged for using the card for a deposit on a gambling website.

With UK credit card holders paying £219 million in fees last year, we’re shining a light on what cash advance fees are, how they work and how you can avoid them.

What is a cash advance fee?

A cash advance fee is something that’s added to any cash transaction you make on a credit card. As mentioned above, this isn’t just limited to taking money out at an ATM machine – even things as simple as buying a lottery ticket on your credit card counts as a cash transaction and will incur a fee.

It’s charged as a percentage of how much you have spent on the card, which essentially is a fixed fee. This ranges from credit card to credit card, but for most providers it’s 3%. In some cases, depending on what it is, it can actually cost you more than the transaction itself.

What transactions have cash advance fees?

  • ATM withdrawals

This is the most common reason to be charged a cash advance fee and the one that a lot of people usually know about. Credit cards seem like they’re designed to be used like a debit card, but this isn’t the case, which is why we always advise to avoid using it to take out money from ATM machines.

  • Foreign currency exchange

There’s no escaping the fact that when jetting off on a dream holiday, the last thing we want to worry about is having enough cash. However, it’s important to be aware that buying foreign currency with your credit can cause you to be charged a higher fee than normal depending on how much you exchange. It’s for this reason that travel credit cards exist, which help you to avoid fees and charges when you’re abroad.

  • Gambling (all forms)

Most people think this is restricted to online bets and the casino, but even simple things like buying a lottery ticket or buying into a fantasy football team are considered gambling. As such, using your credit card for them means you will be charged a cash advance fee – which is why we advise against this.

  • Gift cards

This is one of the more shocking ones that you get charged for. Buying a gift card for someone with your credit card, unfortunately, counts as a cash transaction. As such it’s best to use your debit card or cash to buy these.

  • Paying utility bills

Although it’s never advised to do so, paying a utility bill can sometimes lead to you being charged an advance fee. This differs between credit card providers, so it’s best to contact them for clarity. As such, we advise to always pay your bills from a non-credit account to avoid confusion.

How to avoid being caught out by cash advance fees

There are things you can do to help yourself avoid cash advance fees. For example, if you think that you’ll need to take out cash from the credit card at one point, look for cards that don’t charge for this such as Metro Bank.

For those who have no choice but to lift cash from an ATM, try to do this in as little withdrawals as possible to avoid being charged multiple cash advance fees. It’s also important to pay the bill as soon as possible to minimise the amount of interest you’ll be charged for the transaction.

If you plan on using a credit card abroad, shop around for companies that offer travel-specific card. These will usually hold no charges for withdrawals and the interest rates will usually be lower.

Some cards also offer promotions that will give you 0% on purchases for a set amount of time. This can help you to avoid the fees but be sure to know when the promotional period ends so you don’t get caught out later.

If you’re struggling with your credit card bill, speak to one of our advisers today? We offer free and confidential advice to help you work through your debts and find a solution that works for you. Speak to an experienced advisor on 0808 2085 195.

You could write off up to 75% of unsecured debt with our debt assistant.

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