What is a Cash Advance?

What is a Cash Advance?

Have you ever wondered what is a cash advance? It is a loan that is funded from an open balance in a credit card account or line of credit. A cash advance is a common feature that is offered to consumers by their credit card providers.

SureSwipe in South Africa offer cash advances to businesses when they need them.

The amount that can be borrowed and how often it can be borrowed will be dependent on the terms and conditions of the credit card agreement.

How Does a Cash Advance Work?

There is a credit limit attached to your credit card and the issuer will also set a cash advance limit. The limit set will usually be the credit limit available or percentage of that amount.

A cash advance can be taken from an ATM with the users PIN or at the issuers bank counter.

You can’t exceed the cash advance limit at the ATM but it will dispense real currency. There are cases when the amount does exceed the limit but the ATM will still dispense it, however the exchange will become flagged. This can then lead to a penalty or fee.

Why Would You Use Cash advance?

Credit cards and debit cards are widely accepted there are still merchants that will still only accept cash.

You wouldn’t take a loan for such an amount and with a debit card you may only use what is in the account.

If you have a cash emergency, then taking a cash advance against your credit card balance is a practical option.

The Cost

It can actually become expensive to take a cash advance so you should look at other methods of payment before you jump into more debt.

There are usually high fees attached to taking a cash advance as well as a high interest rate that is charged on the borrowed amount. This rate is usually higher on an advance than that on a card purchase.

The monthly credit card payments will generally go toward card purchases first with the lower interest, which means a cash advance will stay on the account longer with high interest until it is paid.

The ATM may also have a charge for taking the money so you then incur this and any issuer fees for the service.

A cash advance is then real cash that you are able to take off your credit card. It can be a viable solution especially if you are in situation and need it, but remember to pay the amount off as soon as you can, so the balance is settled.