Get the Best Credit Cards in Singapore
The process of obtaining cash by using a credit card is known as cash advance. Cash advance is bad for customers, and we recommend against using it. You should only resort to this process after you have exhausted all other methods of getting cash such as withdrawal from a savings account. Cash advance comes with high fees and interest, which you are charged the moment you receive money. This cost is often so high that it negates any short-term benefit you may receive from cash advance. The following guideline notes every important information you need to know about getting a cash advance. In this section we will explain:
- How cash advance works- Typically, taking a cash advance involves upfront and hidden fees. By understanding the features of a cash advance, you can minimize the cost.
- Things you should be careful about when taking a cash advance- It’s not easy to pay a balance from a cash advance and the terms and conditions sections of most credit cards don’t explain this process completely.
You can take cash advances by using an ATM, a convenience check or with a bank teller. To take a cash advance from an ATM, you need to have a PIN. If you don’t have a PIN set for your account, call the customer care service of your card provider and ask them to set a PIN for your account. Once you get the PIN, the process of taking the money out is the same as using debit cards.
Here is a list of some of the major credit card companies in Singapore. If you use one of these services, you can use these numbers to get a PIN for your credit card.
|Issuer||Customer Service Phone Number|
|DBS & POSB||1800-111-1111|
Lastly, you can use a convenience check to take a cash advance. You may have received these cards before. Often credit card companies send convenience checks with special offers to their customers. Convenience checks can be used similarly as ordinary bank checks. Unless the convenience check is attached with an offer such as 0% APR for 5 months, we advise you to avoid them.
How much money can you get using a cash advance? The answer depends on your card issuer and your FICO credit score. The higher your FICO score, the more money you can take out using a cash advance. The highest amount you can take out is your credit limit minus the cash advance fee. Some banks set a different cash credit limit which is usually a percentage of your credit limit.
The cost of a cash advance: To get a cash advance, you have to pay an upfront fee and a different APR. Usually, the upfront fee is the greater of S$15 or 6%. For most credit cards, a cash advance of up to S$250 will cost you S$15 in upfront fee. If the withdrawal is larger, the fee will be 6%. The total balance of your account is the sum of the cash advance and the upfront fee. This point is important since your cash advance APR depends on it. Your cash advance balance and the balance from purchases are not the same. The cash advance balance charges higher interest rates from the moment you get the money. There is no grace period for cash advances.
We examined the credit cards in our database and found out that on an average the cash advance APR is around 29%, much higher than the purchase APR. The average purchase APR lies around 25%. Let’s calculate how much a 29% APR will cost you. If you take a $1500 cash advance on the first day of your billing cycle, the upfront fee will be S$1,500 x 6% = S$90. The interest for the first month is2.4% of $1500= $36. The calculations for the next 6 months are given below:
In 6 months, you’d end up paying 17% in interest. So, the total fee you will pay for a S$1500 cash advance in 6 months is= S$90+ S$230= S$320. This is why we don’t recommend cash advances. They can cost you a lot if you are unable to pay off the debt quickly.
How funds are applied: When you make a minimum payment using your credit card, the funds are applied to your purchases. This happens since most credit card issuers direct minimum payments toward items accumulating lower interests. You can’t target items while making your payments. You can’t request for funds to pay off your cash advances before your purchases. However, by law, any payment that exceeds the minimum has to be applied to the highest APR balance. If you must take a cash advance, we advise that your next payment be the minimum + the cash advance. It is best if you can pay the whole debt off.
Special purchases: You have to be careful about certain purchases. Banks consider certain purchases as cash advances even though you didn’t take the money out from an ATM or using a convenience check. Following is a list of purchases that can be treated as cash advances:
- Lottery tickets
- Cash equivalent purchases on PayPal
- Traveler’s checks/money orders
- Foreign currency
- Casino gambling chips
Sometimes transferring funds to a PayPal account may be considered as a cash advance. This applies when you use PayPal to buy certain items such as gift cards that are categorized as “cash equivalents”.
Where to find the information you need: It is impossible for us to compile the different terms and conditions of all the credit cards available in Singapore. But following this guideline you can look through the terms and conditions of a credit card and pinpoint the information you need to find to understand their rules about cash advances. The terms are frequently updated so you must go through them before taking a cash advance.
Cash Advances from the Card Issuer’s Viewpoint
Banks and credit card companies charge high fees and interest rates for cash advances because it is a high risk deal for them. The consumer may fail to repay the loan. When you buy anything using your credit card and fail to pay off the debt, the credit card company can’t easily repossess the purchased item and recover the loss. Therefore, banks charge high fees and interest to offset the high risks associated with cash advance.