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What is a Cash Equivalent Transaction?

Written by and posted on April 10, 2012

High interest rates are never ideal when it comes to credit cards. And cash advances can have the highest interest rates around (on just about every card). That might be enough to discourage you from using your credit card at an ATM to withdraw cash. But did you know that you might get charged your card’s cash advance rate for other transactions too?

These other charges that are treated like cash advances are called “cash equivalent transactions.” Let’s take a closer look at them.

What Does Cash Equivalent Mean for Credit Card Users?

If a credit card transaction is being treated as cash equivalent, that means the credit card company considers it equal to a cash withdrawal. That also means you can end up paying much more in interest than you expected. And remember, not only do cash advances have higher interest rates, but they’re generally not eligible for any interest free days (meaning you’ll start getting charged right away). Even worse, you might have to pay a cash advance fee on top of the interest.

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What Kinds of Transactions Might Count as Cash Equivalent?

To give you a better idea of what kinds of transactions might be subject to the higher cash advance interest rate, here are some examples included in the cardholder agreements of some major credit card issuers (in addition to ATM withdrawals).

  • Transferring money from your credit card to another account you have with the same issuing bank
  • Taking your card to a bank branch to withdraw cash against your credit limit
  • Using convenience cheques tied to your account (more likely with a bank line of credit like Citibank Ready Credit than a credit card)
  • Purchasing traveller’s cheques using your credit card (such as through the card’s issuing bank)
  • Making over the counter bill payments (like paying utility bills at your local bank branch)

Just because an example is listed here, it doesn’t guarantee that it’s a cash equivalent transaction with your own credit card company. Always check your own cardholder agreement as these terms can vary from one issuer to another.

Have you come across other charges that were treated as cash equivalent transactions? If so, leave a comment below so other consumers know what to be aware of as they make purchases and bill payments with their credit cards.

About the author

Roland Bleyer

Roland has years of experience in the financial industry and is the founder of the Credit World group. He has overseen Credit World grow to become the number one reseller of retail banking products. He is a regular contributor to this blog and and aims to help people make the most of their money and help the consumer find the best possible product. Roland dedicates his time writing finance articles to provide people with information they need. You can find him on Google+ & twitter

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