What is a Credit Card Cash Advance?

Credit card cash advances are an easy way to borrow money, especially if you have a credit card. But what are the cons that’ll happen if you get one? Find out here.

Have a credit card? Lucky you—you get to have a number of perks and benefits that come with one. Depending on the kind of card you have, that includes cashback, rewards, no annual fees, and more. Part of the things you get to do with a credit card is a credit card cash advance.

In simple words, a credit card cash advance allows you to borrow money from your credit limit. You just need to have a credit card and then walk to the nearest ATM to withdraw money from there. Sounds too good to be true, right?

Any kind of loan, including a credit card cash advance, comes with risks. While this might sound convenient, since there’s no application process required, there are some things (including some hazards) that you should consider.

Learn all about credit card cash advances and if it’s something that you can handle. You can also check out alternative loan options below!

What is a Credit Card Cash Advance?

It’s pretty much self-explanatory—it’s loaning money from your credit card. The perks of having a credit card is not just you being able to pay for expenses with it, but also being allowed to get a cash advance from it via an ATM. It’s not the same as withdrawing from your debit card because that involves money from your bank account. A credit card cash advance is essentially borrowing from your credit limit. It’s quick and easy but doesn’t come without its downsides.

Pros & Cons of Credit Card Cash Advances

Pros of Credit Card Cash Advance:

1. Extremely fast and instant – As mentioned, you just have to use your credit card to withdraw at your nearest ATM. Boom, instant cash! It’s easy and quick.

2. No application process – Because all you need to do is go to an ATM to withdraw money using your credit card, then there’s no application process to go through or documents to show.

Cons of Credit Card Cash Advance:

1. High interest rates – With great, instant money comes great responsibility, including—you guessed it—high interest rates. Credit card cash advances are expensive because it immediately starts getting interest the moment you withdraw, so you should settle your credit card bills ASAP or earlier to avoid paying too much.

2. Can lead to bad credit score – If you try and get a credit card cash advance, then this may potentially hurt your credit score, since lending companies see people who frequently use credit card advances as irresponsible and unlikely to pay their debts.

3. Extra fees – Aside from interest rates, you would also need to pay more fees when you get your cash advance, depending on how much you will withdraw. It normally would cost around a certain percentage of that. This varies from bank to bank.

4. The temptation to keep getting it – Because it’s so easy to get a credit card cash advance, you might be tempted to withdraw again and again. Pro tip: if it’s starting to affect your finances, then just don’t!

5. You need a credit card – Obviously, you can’t get a credit cash advance without having a credit card! You would have to go through the credit card application to try this, which is also a hassle in itself, considering all the credit checks and documents to submit.

How Much Cash Can You Withdraw from Credit Cards in the Philippines?

This all depends on the type of credit card that you have, your card provider or bank, and your credit limit—which differs for everyone! Cash advances are normally capped at a certain percentage of your card's credit limit. It’s usually at 30% of your credit limit. So, if your limit is PHP 50,000, then you can get a cash advance of PHP 15,000.

More premium credit cards in the Philippines allow the holder to withdraw 70%-100% of their total credit limit. However, this is usually reserved for more VIP clients. So, long story short, it all depends on your card and limit!

Costs and Fees for Credit Card Cash Advances in the Philippines

There’s a new BSP memorandum that has capped credit card cash advance fees to PHP 200. Cash advance rates also range from 1%-2%. Apart from that, you may also be charged if ever you withdraw cash that is beyond your credit limit. These over-the-limit fees are around PHP 500-PHP 1,500.

Credit Card Cash Advance vs. Personal Loans

Credit card cash advances may seem super convenient when it comes to emergencies or times when you’re short on cash, but a personal loan could be a better option for you. Here’s why.

• Lower interest rates – Credit card cash advance interest rates are quite high, which is why they’re typically discouraged when it comes to borrowing money. You’re highly likely to get a cheaper rate with a personal loan. Secured personal loans with collaterals can help you get a lower interest rate as well.

 

• You get to pay in installments – You usually choose your personal loan terms and pay over the period of time you’ve decided on, whether that’s in a few months or more. This will let you budget your money and manage your debt easier.

 

• Less fees and charges – There are personal loans that don’t come with fees, as compared to credit card cash advances that have extra charges for just withdrawing the money.

Best Alternative to Cash Advance

Admittedly, credit card cash advances can be quite risky, coming with more cons than pros. But how else can you get money this fast and this convenient? The answer is quick online loans! There are loads of digital banks and finance apps out there where you can get loans within 24 hours—sometimes even within a few minutes! All you usually need to do is download a loan app/digital bank app and then go through the hassle-free application process.

Tonik’s Quick Loan is one option where you can get an easy loan. Once you download the Tonik App and onboard an account, you can apply for a Quick Loan, which ranges from PHP 5,000 to PHP 50,000. Fill in the information needed for the application and submit your documents accordingly (just 1 valid government ID and an income document). Wait for a few minutes and voila! You’ve got the loan disbursed on your Tonik Account.

Can ‘ya believe that all that can take as fast as 30 minutes?! You don’t even need to go out of your home or walk to an ATM for that. Super easy!

For more options, you can read our blog on online loans here.

Tips for Using Credit Card Cash Advance in the Philippines

1. Use only in case of emergency – Because of high rates and its effects on your credit scores, you should only use a credit card cash advance when you need money immediately, and when cash is the only option for paying for something. Think of it as a last resort, as experts generally don’t encourage using a credit card cash advance. Otherwise, you can put the expense on the credit card itself or get a loan online.

 

2. Carefully review your card’s terms and conditions – Stop before you head to your ATM and read your card’s T&Cs again. You need to know what you’re getting into before you withdraw the cash in order to avoid surprises that you aren’t ready for. Know the fees, extra charges, and interest rates so that you can properly prepare yourself for these.

 

3. Be mindful of your credit limit – Double check how much you’ve already spent using your credit card. You want to not overspend or withdraw money that’s beyond your available limit, because the bank will charge you a fee if you do. Borrow only what you need. Once you get your cash advance, avoid using your credit card for other things until you’ve fully paid your debt.

 

4. Pay your dues as fast as you can – Once you get the cash advance, the interest on that begins to build from day 1, so you want to pay it back soon to avoid losing more money.

 

5. Check the ATM you’re withdrawing from – Withdraw your cash advance yourself to avoid any trouble. Because skimming or hacking is so prominent nowadays, check the ATM for anything that looks out of the ordinary. Remember to shield your PIN as well from prying eyes.

Sources:

• What is a Credit Card Cash Advance?
• What is a cash advance and how does it work?
• 4 things to consider before taking out a credit card cash advance
• Pros and Cons of Credit Card Cash Advances
• Smart tips in using cash advance