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CASH is credit card kryptonite: the one thing all cardholders know (we hope) they should stay well away from.

This guide will look in more detail about why, exactly, that is and then examine the credit cards that claim to be an exception to the rule.

Is it ever worth abandoning your trusty debit card to use them?

Credit cards and cash: what's the problem?

There are two problems: first, interest rates and fees for these transactions are high and second, a 'cash advance' doesn't just mean withdrawing money at an ATM.

Interest and fees

When you make a cash advance transaction using a credit card, the majority of providers will charge a handling fee, usually around 3% of the balance withdrawn, and start charging interest, usually at a 20% to 30% p.a. variable rate.

The rate at which interest is charged is almost always higher rate than you'd expect to pay on purchases and there's rarely any interest free period like the one offered on purchases.

Let's look at what that will mean in practice.

Say your provider charges a 27.9% p.a. rate on cash advances as well as a 3% fee. You use that card to take £1,000 out at an ATM. Here's how much you'll pay over time (including the £30 handling fee).

	10 days	20 days	30 days	50 days
Total cost	£37.64	£45.28	£52.93	£68.22

This is an extreme example - you're unlikely to take out £1,000 all at once - but even if you withdrew just £100 from an ATM with 20 days to go until the the amount was paid back in full you'd pay the minimum fee - £3 - plus approximately £1.50 in interest.

That might not sound like a lot but it really starts to add up when you borrow larger amounts or over longer periods of time.

'Cash advance' classification

It's well worth delving into your credit card's terms and conditions to get the full scoop on what the term 'cash advance' really means.

Typically, it will include the following:

• Withdrawals from an ATM
• Over the counter withdrawals from the bank
• Cash back at the till
• Foreign currency purchases (e.g. from Travelex)
• Gambling transactions (including buying a lottery ticket or food and drink at a casino)
• Credit card cheques
• Buying shopping vouchers or gift cards
• Money transfers (e.g. moving money to a current account or making a mortgage payment)
• Paying utility bills

Credit card providers classify transactions with a code which is why even buying food and drink in a casino counts as a cash advance: there's no way for them to tell the difference.

However, also for this reason, it is possible that a clerical error could occur and a transaction could be incorrectly classified as a cash advance.

If you suspect this has happened to you you're entitled to dispute the transaction and ask your credit card provider to investigate the issue with the retailer. See more on how this works in our chargeback guide.

On a side note, the name 'cash advance' is, we think, itself quite revealing. It's best known nowadays as a term used for payday loans, which also happen to charge high interest rates and fees.

Credit cards for cash withdrawals

As we noted above, though, not all credit cards charge so much for cash advances.

A new breed of specialist credit card is emerging, offering the same, or some of the same, benefits for cash transactions as they do for purchases.

Unsurprisingly, in light of foreign currency and traveller's cheques purchases being classified as cash advances, these are also commonly the same as the best credit cards for travel.

Interest free periods on cash advances

By giving cardholders an interest free period on cash advances these deals essentially elevate them to the level of purchases: you can pay off in full at the end of the month and avoid interest.

Sainsburys Gold credit card
	No cash advance fee and cash transactions will be included in the standard interest free period.	Apply here »
Representative Example: 9.94% p.a. variable on purchases. This is equivalent to 20.1% APR representative variable based on a credit limit of £1,200 and including a £60 annual fee. Sainsbury's Bank plc, 33 Holborn, London, EC1N 2HT.

Applicants must be: Aged 18+, with a UK address and no history of bad credit.

Applicants must be: Aged 50+, earn £12k+ with a UK address and good credit history.

However, of the two, only the Sainsbury's Gold credit card offers completely free cash transactions because it doesn't charge a handling fee for the cash withdrawal.

However, there is a £5 monthly fee for holding the card so it's only worthwhile if you can take advantage of its other benefits, which include travel insurance.

The Saga Platinum credit card charges a 2% (£2 minimum) fee on any cash advance transaction but it is at least possible to stay interest-free by paying off in full and on time within the card's up to 55 day interest-free period.

The fees and risk of interest means that neither of these options are as cheap or as straightforward as a debit card, but it does mean that in certain circumstances - for example, abroad where debit card fees can be very high - these deals don't rule out being able to buy foreign currency or withdraw cash abroad when necessary entirely.

Only the Metro bank credit card offers a long 0% promotional period on cash advance transactions and was, in fact, also the UK's first credit card to do so.

0% on money transfers

• Virgin Money credit cards*
• AA credit cards*
• Post Office credit card*

*Click through on any of the above for details on the cost of credit of products from each provider.

Another option for withdrawing cash using a credit card is to use a super balance transfer.

As you can see in the example below, the offer runs alongside a normal balance transfer deal and allows cardholders to move an amount of credit to a current account and then pay it back interest-free during the introductory period.

Virgin Money credit card
	0% balance transfers for 20 mths (2.99% fee) 0% money transfers for 20 mths (4% fee)	Apply here »
Representative Example: 16.8% p.a. variable on purchases. This is equivalent to 16.8% APR representative variable based on a credit limit of £1,200. Virgin Money, Discovery House, Whiting Road, Norwich, NR4 6EJ.

Applicants must be: Aged 18+, UK resident with a UK bank a/c.

However, this way of borrowing in the form of cash can get very expensive if the full amount isn't paid back within the interest-free period (note also you still have to make the minimum monthly payment even though the interest-free period is 20 months).

There's also a fee to pay - usually around 4% of the transferred balance.

For that reason, this method of cash withdrawal is most often used by those who want to repay an expensive overdraft or personal loan: in that case the money saved in interest will, if the deal is used correctly, outweigh the outlay of the fee.

When it's possible to make a purchase rather than taking out cash nine times out of ten a 0% purchase credit card would do the job better with less hassle.

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