What is a Cash Advance?

What does 'cash advance' mean?

In everyday use, 'cash advance' can mean any of the following.

Exact rates, fees, limits and application requirements vary by provider so for a specific product, you'll need to check its current terms and conditions.

Different products can all get you access to money quickly. What matters is the contract, the total cost and when the money has to be repaid.

Does a cash advance always mean taking cash out?

Not necessarily. With a credit card, a cash advance can include more than an ATM withdrawal. Depending on the card, transferring money out of the account and some gambling, foreign-currency or prepaid-card transactions may also count. The exact rules vary by card, so check the terms and conditions if you're unsure whether a transaction counts as a cash advance or an ordinary purchase.

No interest doesn't necessarily mean cheaper

A product can charge no interest and still cost more overall. Fees can add up fast so the useful comparison is the total dollar cost, rather than the label on the box.

Here's a simple hypothetical situation: someone needs $500, three weeks (21 days) before their next payday.

Credit-card cash advance (illustrative example only): Assume a $3.50 cash-advance fee, plus interest charged daily from the day of the withdrawal at an assumed rate of 21% a year. The fee is $3.50, interest over 21 days is roughly $6, and the approximate total cost is around $9.50, on top of repaying the $500.

A Small loan (SACC), using the maximum fees permitted under Australian law (a provider may charge less): The maximum establishment fee, 20% of $500, is $100; the maximum monthly fee, 4% of $500 for one month the amount remains outstanding, is $20; bringing the total cost to up to $120, on top of repaying the $500.

In this example, the SACC charges no interest but its capped fees add up to more than the card's fee and interest combined. That doesn't mean credit cards are always cheaper than SACCs, or vice versa. The point is to compare the total dollar cost using the actual fees and rates that apply to the products you're considering.

What does the 10% repayment cap actually mean?

For small amount credit contracts (SACCs), your scheduled repayments across all SACCs can’t be more than 10% of your net income.

In simple terms, if your net income is $1,000 over a repayment period, your total scheduled SACC repayments can’t be more than $100 for that same period.

The 10% cap applies across all SACCs you have, not just one loan. SACC lenders also can’t charge interest. Instead, they can charge certain fees, which are capped by law.

The cap is designed to limit how much of your income goes towards SACC repayments. But being under the 10% limit doesn’t necessarily mean a loan will be affordable for you. You’ll still need to cover everyday expenses such as rent, groceries, utilities, transport and any other debts or financial commitments.

Does a cash advance affect your credit score?

Using an existing credit card for a cash advance isn't the same as applying for new credit. A new SACC or a newly opened line of credit generally involves a new application and can create a credit enquiry. That's why saying 'a cash advance affects your credit score' is too broad a claim on its own.

There's no simple way to predict how many points a specific event will add or subtract from someone's credit score, since scoring and lending models differ. You can also request a free copy of your credit report to see exactly what's recorded.

Before using a cash advance, check these things

How quickly you get the money depends on the product, the provider and how fast your bank processes the payment.

Before going ahead, make sure you understand what product you’re using, what it will cost, when fees or interest apply, how repayments work, and what happens if you miss one. It’s also worth checking how much money you’ll have left after repayments, whether applying will involve a credit enquiry, and whether there’s another way to cover the expense without taking on new credit.

What if you keep needing cash advances?

A cash advance can solve a short-term gap, but it doesn't create extra income. With a wage advance, getting part of your pay early means there's less waiting for you on payday. Repeat that cycle enough times and a one-off shortage can turn into an ongoing one.

If repayments are becoming difficult, contact the provider and ask about hardship support. Regulated credit providers are required to consider hardship requests and usually have an internal complaints process.

Free, independent financial counselling is available through the National Debt Helpline. They can help if you're using cash advances repeatedly, juggling several lenders or unsure which repayments to prioritise.

Keep copies of the contract, disclosure documents and repayment schedule, you may need them later.