My Purchase Charged as a Cash Advance — Reader Mistake Story

Jun 21, 2019

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Today, I want to share a story from TPG reader Chris, who got hit with fees and interest on a recent transaction:

I’ve always considered myself credit card savvy — I pay my balance in full each month, try to maximize points earnings, and never use the cash advance feature. But on a recent trip to Florida, I made an amateur mistake.

As part of a bachelor party, a bunch of us went to a horse track for an afternoon of betting and hanging out. Near the betting terminals, there was an offer to use a new betting app to place wagers on the day’s races, and to earn a credit toward future wagers in the process. I saw it as a good deal and went for it. The app allowed me to use a credit card to add money to my account, so I deposited $100 using my Southwest Rapid Rewards Priority Credit Card and went about my day.

I didn’t realize my mistake until I checked my statement a few weeks later. The withdrawal was coded as a cash advance (which I should have known), and the $100 was not only assessed a transaction fee, but also started accruing interest immediately. As it turns out, the “special offer” did not kick in until a minimum was spent (which I never hit), so it was a double whammy. In the end, I didn’t earn points on the transaction, didn’t meet the minimum spend requirement on the app and was assessed a transaction fee plus interest. I would have been much better off just waiting in line like the rest of the crowd!

Many credit cards allow you to withdraw some portion of your credit line as cash (from an ATM, for example), but you’ll pay for the privilege. Cash advances incur transaction fees and high interest rates — typically with no grace period — that make them prohibitively expensive for cardholders. Adding insult to injury, cash advances don’t count as qualifying purchases, so you won’t earn rewards on your balance. Unless you have an urgent need for cash in your hand, I recommend looking for another solution.

As Chris points out, it’s not always clear when a purchase will be treated as a cash advance. You can expect it with ATM withdrawals, bank deposits, balance transfers and currency exchanges, but other transactions may also be coded as such, including rent or mortgage payments, deposits at casinos and online gambling sites, purchases of monetary instruments like traveler’s checks or money orders, bitcoin and other cryptocurrencies, payment services like Venmo, and even gift cards (especially reloadable prepaid cards). Results can vary from one transaction to another based on where you are and the card you use, so just because you previously bought casino chips without a fee (as one TPG staffer did in Europe), don’t expect it to work next time.

To avoid getting hit with fees and interest, try reducing the cash advance limit allowed on your card. Most card issuers allow you to set it all the way to zero, so any transaction that codes as a cash advance will simply be declined and no fee will be assessed. The downside is that you won’t have immediate access to cash in the (hopefully rare) event that you actually need it, though you can always raise your limit again in an emergency.

Related: 7 Financial Mistakes I Made While Traveling the World for a Year

I appreciate this story, and I hope it can help other readers avoid making the same mistake. In appreciation for sharing this experience (and for allowing us to post it online), I’m sending Chris a gift card to enjoy on future travels, and I’d like to do the same for you. Please email your own travel mistake stories to info@thepointsguy.com, and put “Reader Mistake Story” in the subject line. Tell us how things went wrong, and (where applicable) how you made them right. Offer any wisdom you gained from the experience, and explain what the rest of us can do to avoid the same pitfalls.

Feel free to also submit your best travel success stories. If your story is published in either case, I’ll send you a gift to jump-start your next adventure. Due to the volume of submissions, we can’t respond to each story individually, but we’ll be in touch if yours is selected. I look forward to hearing from you, and until then, I wish you a safe and mistake-free journey!

Featured photo by cmannphoto / Getty Images.

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