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Cash advance fees warning for credit card users

Written by: Emma Lunn
Credit card users can be caught out by high fees because they don’t understand which transactions are classified as a “cash advance”, according to Totally Money.

A cash advance fee is added to any cash transaction on a credit card. But, this isn’t limited to just cash withdrawals – there are other transactions categorised as cash too.

The annual Financial Awareness Survey 2019, carried out by OnePoll and commissioned by TotallyMoney, found that most people don’t know that buying lottery tickets, entry fees for fantasy football, and exchanging foreign currency all trigger a cash advance fee.

How much are cash advance fees?

A cash advance fee is charged as a percentage of the amount spent on the card, or a flat fee. For example, 3 per cent or £3 per cash transaction — whichever is higher. For small purchases, the fee could be more than the item itself.

For example, a lottery ticket costing £2 could incur a £3 cash advance fee, meaning the fee is 150 per cent more than the ticket itself. This is before any interest is added.

Interest charges on credit card cash advances usually apply from the moment the transaction occurs, rather than benefitting from up to 58 days before interest is charged. Cash advance transactions are also usually excluded from any 0 per cent interest offers — leaving customers with even more to pay.

Alastair Douglas, CEO of credit experts TotallyMoney, said: “If customers aren’t aware of a cash advance fee, they may use their credit card in the same way as a debit card. In some instances, people might not realise a fee or interest is added until they check their statement.

“Being aware of the fee allows customers to make cost-effective decisions when making purchases. If you apply for a credit card, look at how much the cash advance fee is.”

Types of transaction that trigger a cash advance fee

  • ATM withdrawals: This cash transaction is the one that most people are aware of. More than half (51 per cent) of people knew withdrawing cash from an ATM with your credit card will involve a fee.
  • Gambling: Playing in an online casino, buying a lottery ticket, placing a bet, and entering a fantasy football team are all forms of gambling and will include a cash advance fee if you use your credit card.
  • Gift cards: Buying a gift card is considered a cash transaction. Be aware of this when purchasing a gift card and pay with cash or a debit card instead.
  • Currency exchange: Just over a third of people (36 per cent) knew exchanging currency could incur a cash advance fee. Converting a lot of cash could trigger a very high fee based on the percentage of the amount changed.

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