It is difficult to deny that credit cards have become an important part of our daily lives. Simply put, life is easier and more convenient with these modern financial tools. From online shopping to overseas spending, credit cards are everyone’s best friend.
In fact, credit cards do not only allow owners to borrow money electronically. You can withdraw cash from your credit card, which is called a cash advance. While financial advisers would tell you that a cash advance isn’t a financially smart thing to do, you have to be prepared if you encounter one.
Comparison of Top Banks’ Cash Advance Interest Rates and Fees
To give you an idea of how much banks in Singapore charge for cash advances, here is a comparison table. It lists down the top 5 banks. Note that each bank has its own interest rates, fees, and charges. It is best to ask your favorite bank about their costs.
|Cash Advance Fee||
|5% or $15 (whichever is higher)||24% APR, charged every day|
|5% or $15 (whichever is higher)||24% APR, charged every day|
|6% or $15 (whichever is higher)||19.9% APR, charged every day|
|6% or $15 (whichever is higher)||28% APR, charged every day|
|6% or $15 (whichever is higher)||28.92% APR, charged every day|
Big banks like DBS and OCBC would charge ATM charges on top of the fees mentioned above. If you happen to make a cash advance of a small amount, you will still have to pay these charges. There is no getting away from it.
As you may have noticed, the financial institutions mentioned above have different interest rates and fees. Contrary to what you might think, financial institutions are different when it comes to the service they offer and the amount they charge to their clients. This means that you have to get cash advances to institutions you trust. Call your trusted bank and get all the information you need from them so you will be able to choose the best company to help you.
How Does Cash Advance Work?
The term cash advance refers to a short-term loan issued by a credit card company or other lenders, usually with high-interest rates and high fees. In the case of credit card owners, a cash advance allows them to withdraw a certain amount of cash. Despite its cost, borrowers choose to avail of a cash advance because of its quick funding and fast approval.
Types of Cash Advance
A cash advance comes in different forms. It is an umbrella term that means various things. One thing common to all of them is that they come with high-interest rates and exorbitant charges. Here are some of the types of this loan that you may encounter.
This type is probably the most popular of them all. Here, you are basically taking on a line of credit using your credit card. One way to get your money is to withdraw directly from an ATM. Otherwise, some financial institutions would issue a check or an over-the-counter cash withdrawal.
Credit card companies typically charge an interest of 25% per year. Unlike your credit card purchases, the interest begins to be computed once the cash advance is made. Aside from this interest, this transaction comes with a fee, which is usually a flat rate or a certain percentage of the amount withdrawn. Also, for each withdrawal, you have to pay a small ATM service fee.
This cash advance is availed by companies, businesses, or merchants from banks and other financial institutions. Merchants who do not have enough credit use cash advances for their current business spending. Here, the cash advance amount allowed by the bank is not based on the credit score of the business. Instead, it is based on various factors, including the amount in the online financial accounts of the business.
In the consumer lending industry, a cash advance is also known as a payday loans in Singapore. Here, a licensed moneylender lends money based on the paycheck of the applicant. The lender would lend cash, which will be paid on the next payday. If the borrower decides to extend the loan, they will incur additional interest.
Admittedly, payday loans can incur higher interest rates than a merchant or a credit card cash advance. Nevertheless, it is chosen by individuals who have difficulty applying for a credit card. Payday loan applications are faster and easier to process.
Pros and cons
Remember that this type of loan works in certain situations. It is important that you reflect on your personal finances first and assess if this is the right financial decision for you. For many, a cash advance is a savior. Here are some of the advantages of this transaction:
- Great for emergency situations. It is best for situations where you ran out of cash. This is really helpful at times of medical and other types of emergencies.
- It’s fast and easy. Let’s admit it, it’s difficult to apply for a loan in banks. It is simply impossible to apply for a loan if you need the money immediately. A cash advance cuts the processing time.
Meanwhile, here are cons when taking a cash advance. Aside from the cash advance fee, there are other things that might cost you with this type of loan.
- High Annual Percentage Rate (APR). The interest rate of your credit card cash advance is higher than the interest of your credit card purchases. Popular banks in Singapore would usually charge around 24%-27% APR.
- More fees and charges. Aside from the high-interest rate, you also have to pay a transaction fee and an ATM fee when you withdraw. If you happen to use your ATM card to a different banking company, you will also have to pay additional charges.
- It could lower your credit score. Taking a cash advance would increase your credit utilization. Higher credit utilization might mean lower credit scores. Taking more cash advances means decreasing your credit card score.
- Your transactions are unsecured. Unlike your credit card purchase, where you can report any fraudulent activities, a credit card cash advance is difficult to report. These cash advances are often withdrawn cash in an ATM. Hence, if another person made a credit card cash advance on your behalf, it is difficult to take it back from them.
Things to Consider Before Using Your Credit Card to Make a Cash Advance
Before taking a cash advance, you must pay attention to certain things. Below are some of the concerns that would affect your decision to take cash advances.
Much like any other financial decision you have to make, you must get all the information before applying for this type of loan. It is crucial that you are familiar with the fee that your bank or another moneylender would charge you.
- High-interest rates. As discussed above, credit card cash advances have higher interest rates. You might think that credit card transactions already have high-interest rates, but you will be surprised to know that your cash advance transaction will cost you even more.
- Additional fees. On top of your interest rate, you will have to pay a cash advance fee. For example, if you decide to borrow $1,000, you can only withdraw $940. Also, if you decide to withdraw your cash using an ATM not owned by your bank, you will be charged an additional fee.
- No interest-free options. Unlike your credit card purchases, your cash advance will earn interest on the same day you withdraw your cash. This means that the interest charge you incur is on a daily basis. This shows how your cash advance is costing you high so fast.
- No points earned. Credit card users are given the perks of points for each of their purchases. The case is different with credit card advances. You do not earn reward points or frequent flyer points. In short, there is no perk in availing of these transactions.
- Complicated credit card payment. You may not know this, but credit card companies in Singapore prioritize the payment of your debt with the highest interest charge. This means that your monthly credit card payment will be used to repay your cash advances before your purchases.
- Foreign transaction fees. Those who use their credit cards abroad will be charged a foreign currency fee. This is an additional cash advance fee aside from other fees you are charged with. This overseas spending can be expensive for some.
Alternatives to a Credit Card Cash Advance
Now that you know the high cost of cash advances, you might want to consider other options when it comes to getting funds and money quickly. If you are in need of cash but do not want to take the cost of cash advances, these are some of the faster and cheaper alternatives you have.
If you are in need of quick cash, you may want to apply for a payday loan instead. It is offered by licensed moneylenders and other financial institutions in Singapore. Here, instead of borrowing from a credit line, you get to borrow money based on your monthly salary. You will repay the amount you owe on your next payday.
It is fairly quick to process a payday loan, about 30 minutes or so. Also, its interest charge is as much if not higher than cash advances. People who choose this option are those who do not own credit cards or whose credit limits are maxed out. Despite the high-interest charge of a payday loan, people desperate for cash are still willing to avail of this type of loan.
A better option than a payday loan is a personal loan, which is another form of a short-term cash loan. Notably, a personal loan has a lower interest than cash advances or payday loans. Usually, it would take you a day to process this type of loan. Personal loans are given by legitimate financial institutions, so you do not need to worry as your rights as a borrower are ensured.
One licensed moneylender in Singapore you can trust is 365 Credit Solutions Pte Ltd. We have an easy and fast personal loan application process. Our interest rates are competitive, and we have given help to hundreds of borrowers over the years. For more queries about our loans, deals, and promos, send us a message here.
Take note that 365 Credit solutions also offer foreigner, business, and bridging loans. The company has a lot of credit options for those who are in need of money quickly or in need of some extra cash. These various loan types are meant to help individuals for any emergency situations and big purchases.
A no-brainer solution to those in need of quick cash is opening a debit card. Deposit an amount in your bank account, and you can use your debit card to withdraw money anywhere and any time. You can use your debit card in any ATM, which means that using this option is hassle-free. Just memorize your PIN, and you will always have access to your money.
Needless to say, a debit account is different from a credit account. Here, your bank links your savings or current bank account to your debit card, which means that the money you are withdrawing is your own money and not something you borrow. This option is free from interest. The only caveat is that you are charged a minimal fee if you use an ATM not owned by your bank.
Cash advances can be good or bad, depending on who you ask. For some, taking it is committing a bad financial decision because of its high-interest charges and its many other fees. But, for others, cash advances are essential at times of emergencies. It is a quick loan that saves people at times of great need.
Wherever you are in this debate, you cannot deny that cash advances have their own appeal. They are ideal as sources of cash during emergencies. While they are costly, they are fast, easy, and reliable. It is no doubt then that people will continue to get them.
If you have enough time to apply for a loan instead, a good alternative from cash advances is a personal loan. It takes less than an hour for a licensed moneylender to process your application. It has a better interest charge than cash advances. Also, the application process is much simpler than getting a credit card.