A credit card cash advance sounds convenient because you get instant cash from your credit card or line of credit. However, services for cash advance Singapore are huge traps that can send anyone in deep debt at any time.
Even if you’re careful, your monthly dues can eat easily through your budget. Plus, you have better alternatives than borrowing cash from your credit card.
What is Credit Card Cash Advance?
Cash advances can give you up to 90% of your credit limit. So if your bank deems you an ideal borrower, you can have stellar credit limits. However, you’d be surprised with the monthly or regular interest rate increases inflating your unpaid cash advance installments, and they’ll often exceed your expectations.
- Short term loans from a bank
- No minimum cash advance amount
- Accessible through ATM
5 Reasons Why Credit Card Cash Advance in Singapore is a Terrible Decision
1. High-Interest Rates
Here’s an excellent example. A bank grants you a credit card with a credit limit of S $2,000. You decide to advance S $1,500 through a bank ATM. Plus, its annual rate is 28% charged daily.
Suppose you didn’t pay for one year. Then, your cash advance total repayments will spike up to S $1,984.48 with a total interest of S $984.48 in a single year.
Balance to pay = Cash advance amount x (1+ annual interest rate/ days of compounded interest)(days of compounded interest x years unpaid)
Balance to pay = 1,500 (1+0.28/365)(365)(1)
Balance to pay = S $1984.48
An annual interest of 28% has enormous implications if you pay for it in installments. We don’t condone the use of cash advances or credit cards. However, we highly encourage using a monthly interest credit card, which allows you to pay your loan amount within a month completely, giving you zero interest headaches the following month.
2. Stellar Cash Advance Fees
Credit card swipes have no service fees apart from the annual fees most cards have. However, cash advances are different — they have a cash advance fee per transaction.
This aspect makes them much more expensive than presenting your card with partner merchants. Most banks charge a 5-7% processing fee per cash advance on top of the daily charged interest you’ll face.
3. No Cashbacks and Promotions at All
Once you have a credit card, you can enjoy swipe and 0% interest installment options with the bank’s partner merchants within your available credit limit. You can enjoy cashback and merchant promotions, too.
However, you won’t receive the same benefits using cash advance services. Plus, you’re paying a much higher fee in the process.
4. Better Alternatives Than Card Cash Advance
Singapore borrowers have a huge selection of alternatives than cashing out using your credit card using an ATM. Check out the following alternatives.
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Personal Loan
Both banks and licensed moneylenders offer personal loans for Singaporeans and foreigners. It requires excellent credit scores (when borrowing from banks) and can give you up to six months of your monthly salary with an accessible interest rate and a one-time processing fee.
Thus, personal loans work better versus the per-transaction fees and excessive interest of credit card cash advance. Read here to know how to get low-interest rate personal loan.
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Licensed Moneylenders
You won’t need high credit scores applying for a licensed moneylender personal loan. For example, if you don’t prefer personal loans that provide you six months of your salary, you can apply for a licensed moneylender’s line of credit if it’s an available service.
However, like a bank’s line of credit, licensed moneylenders extend this product as a goodwill service to their loyal and repeat customers, which would mean you’ll have to use their basic or recommended financial services and close an account before applying for revolving credit.
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Payday Loans
Another licensed moneylender service, payday loans, is a great alternative to any cash advance, especially if you need additional funds to tide you over.
In addition, payday loans are handy for freelancers and odd-job employees because they can prevent utility cut-offs and ballooning high-interest rates.
However, we won’t recommend payday loans as balance transfers or debt consolidation services because they still have an interest.
Keep in mind that payday loan interest adds up daily, which means it compounds from the payday loan approval date until the day you pay your loan. Plus, its interest rate compounds if you fail to pay for your loan completely.
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In-House Financing
If you’re planning to buy a certain product or property, companies sometimes provide in-house financing services.
For example, HDB’s concessionary loan is an alternative to bank-financed HDB loans and financial products, which offer a unique set of interest rates and conditions. However, remember that other companies offering in-house financing can vary their interest and repayments higher or lower than banks.
Plus, some of their attractive offers might only be applicable for the first five years. For example, you might enjoy 1.5% interest on your new condo loan for five years and see your interest rate payments balloon to new heights.
5. Massive Credit Score Damages
Having multiple cash advances can damage your credit score over time and much higher than unpaid debt on an HSBC credit card or any other credit card account. This is because a cash advance has a higher processing fee, which happens per transaction.
On the other hand, merchants pay your swiping fees per transaction, making card swipes easier to manage.
Additionally, financial institutions will make inquiries per new credit card application, negatively affecting your credit score. Therefore, choose to use a personal loan or a better compatible financial product to prevent credit score reduction and future issues.
Why Should I Always Keep My Credit Scores Up?
Your cash advance is helpful for one scenario for at least a month or two. However, if you can’t repay your loan on time, it will affect your credit scores negatively.
In addition, if you plan to apply for a higher loan limit in the future, your low credit scores will slow down or prevent you from achieving success with your loan application.
Borrowers with poor credit can rebuild their scores. However, they’ll need to go through several financial products before banks can grant them high amount loans because of their excellent ratings.
Fortunately, licensed moneylenders with low credit score requirements can easily help low credit borrowers improve their ratings.
Should I Still Swipe Instead of Cash Advancing My Credit Card?
Both merchants swiping and cash advances are credit card services. However, the merchant pays for each transaction swipe. Therefore, you only spend the credit card’s value and don’t incur additional transaction charges.
On the other hand, personal cash advances will charge you a hefty processing fee for every transaction. Doing this will continuously increase your credit card debt faster than swiping your card.
Regardless of which credit card service you use, always pay your outstanding debts on time and calculate the interest and processing fees, you’ll deal with in the future.
Are Their Loan Products Offering Higher Amounts Than My Existing Credit Limit?
Personal loans and other financial products aside from cash advance services will provide you an average of six months of your monthly salary. If you plan to work with banks, you’ll often have to open a new bank account for immediate loan disbursal.
On the other hand, you can use licensed moneylenders for immediate loan disbursal by physical cash handovers or bank deposits on your loan approval date itself.
The Best Alternative to Credit Card Cash Advance
Licensed moneylenders offer the best cash advance and bank loan alternative because you have a flat 4% interest and a maximum 10% processing fee ceiling for a six-month-salary loan.
In addition, Licensed Money Lender can provide you with the best short-term loans with lenient consideration on your credit scores. Visit our website today and apply for a loan now!
