Cash Advances with credit cards

A cash advance implies some sort of loan, not a mere withdraw of existing funds from your account.

Diane, In a word - NO! Cash advances with a credit card are among the worst options for getting cash. Interest at dreadful rates will start accruing the instant the machine spits out the cash. While your friend may be a seasoned traveller, I'm not sure her logic on this topic is correct. AFAIK, the only way around this problem is to deposit money in your credit card account prior to travelling so that you have a credit balance. The best way to get cash is via an ATM card, withdrawing money from your chequing account. Exchange rates are processed at the Interbank rate, which is usually the most favourable. Depending on which financial institution you use and your specific account benefits, you may also be charged a service fee on transactions. Taking a cash advance on a credit card would be the LAST option I'd ever consider, and only under extreme circumstances. Cheers!

A cash advance is a loan regardless of a positive balance at the time of withdrawal. It doesn't get paid off until the end of the billing cycle. If the balance at that time is not enough to pay all that is due, what's left (even if a payment is made) continues at the cash advance rate which is sometimes worse than the regular stupid interest rate. What I've never had explained is how the two rates get sorted out unless you get to a zero amount due.

There is one way this could make sence. Start with zero balance. Already have online payment set up. Get the cash and then go online before the close of business and repay that loan. 21% interest adds up Fast! My CapOne rate is like 9% for purchases but 18 or 21% for cash advances and starts the day of the withdrawal. No grace period. Much easier to get a debit card at a bank or credit union without fees.
And safer than doing online banking on an open, public network. Enjoy the trip!

Diane, its not just "these posts" , its on any travel forum, I can list som of the busy ones, this one of course Rick Steves Helpline, but also Fodars, Frommers, and Tripadvisor and if you go on any of those and post this question you will get the same answer from on all of them. Yes it would be folly to follow your friend on this.. some people may have more dollars then cents... if you know what I mean.. Thousands and thousands of travel forum users can't all be wrong and your friend right.

Our Credit Union has a credit card with no cash advance fees and no exaggerated interest rate. The last trip we made we used it instead of our debit card for more security. That being said, when we came home we paid it all in full with the money we had set aside for the trip. Most credit cards have horrible cash advance fees and rates, so unless you have a card that does not charge the fees and exaggerated interest, use a debit card.

Thanks for all of your help. Perhaps I misunderstood my friend, and she is not around to confirm, but I am going to take your advice.

While we are on the subject of ATM withdrawals, make sure to get a no fee ATM card if you travel a lot! Capital One has one, as do some other banks ATM cards, and they will save you a boatload. You may be charged a good exchange rate spread on your foreign withdrawals, but you will likely get a kick in the pants for the amount that banks charge in transaction fees!!!

@Ed, Thanks for the clarification on the way cash advances are handled. I should have known the Banks would get their money regardless, and there wouldn't be an easy solution to getting around the cash advance issue. @Diane, If you decide to use an ATM card, note that your travel funds must usually be in a chequing account with a four number PIN. It's a REALLY good idea to pack along a "backup" ATM card in case of any problems with the primary card (I've had that happen). Finally, be sure to notify all of your financial institutions that you'll be travelling abroad so they don't "freeze" your cards when they detect transaction activity in Europe. Cheers!

FWIW, the only credit card of mine I've recently investigated concerning cash advances works like this - let's say I have a monthly payment of $100 on that account, and I take out a cash advance of $50. I need to pay $150 on my next statement to get rid of that cash advance amount and it's associated extra charges. Then, back to normal. I, too, wondered how they got 'teased out' of the regular 'ol balance due. So for that account, anyway, it's not a disaster IF I can pay off the cash advance portion on top of my regular monthly balance amount...And the sooner the better. Diane, I don't know if she really meant, technically, a 'cash advance' or if that's her way of speaking of ATM withdrawals...but definitely use an ATM card for cash! Being two cards on two different accounts (in case one card is finicky and not working) if possible, and let your bank know when and where you're going so that you have access to your account.

There have been recent reports like that from Alex of those with credit cards that don't charge any cash advance fees or interest - I assume if you pay it off with the next bill. I have no evidence to say they are wrong or mistaken, but it still seems odd that any bank would offer a loan at 0% interest and essentially lose money on the deal. But maybe some small credit unions offer it as a perk to their small pool of loyal customers. So perhaps your friend has one of these great deals. But for the 99% of the rest of us, you'll get charged 15-30% interest the day you take out your cash advance until they receive your payment in full. That adds up really fast and is far above the fees charged by debit card ATM withdrawls and even currency exchanges. And there is no added security withdrawing cash with a credit card than with a debit or ATM card (using credit cards for payment is more safe).

If you have a positive balance on your credit card, that money belongs to you and can be withdrawn without incurring an interest charge, just like an ATM debit card drawing on your account (unless you deal with a particularly nasty bank.) But a cash advance to be charged to credit is a loan and you start paying ferocious interest immediately. At some banks the charge may apply to the entire balance owing, not just the loan. So it is a huge bookkeeping hassle to use the positive-balance method for no clear advantage over a simple ATM debit card. Another hint: Draw out a substantial amount of foreign currency at one time and then use cash instead of plastic; it's cheaper and easier.

One other caution about trying the positive balance method with a credit card:
Awhile back there was a discussion of this topic and someone reported that they had set up a positive balance in advance of a trip. Unfortunately, though, the credit card company cashed out the balance, sending a check out after the person left on their trip, leaving them with no access to their money. I agree that there is no advantage to trying this over just taking withdrawals from an ATM using a debit card.

I may have missed it but in addition to the high interest rate your bank will charge on a cash advance (normally 20 percent or more), they'll also charge an upfront fee (often 3 percent). The Dodd-Frank bill supposedly keeps banks from saving that balance until last so they can charge you the highest rate - but I have no personal experience with a cash advance on my statement. For me a cash advance from a credit card would be an emergency only situation - when both my primary and backup debit card were lost/stolen or not working. For purchases, however, it's the opposite. If I'm paying for a meal at a nice restaurant, renting a car, buying a train ticket, or buying an expensive souvenir - something that outstrips my available cash or daily ATM limit - I'll always use a credit card rather than a debit.