It’s so easy, isn’t it, using your credit card anywhere, anytime? Credit cards give you easy access to cash and allow you to swipe your card anywhere in the world or just draw out some cash quickly. But beware the credit card cash withdrawal fees that come with such benefits

Credit card cash withdrawal fees – through the ATM at home

Your credit card charges can spiral because of credit card cash withdrawal fees. In fact, withdrawing cash on your credit card is never a good idea, even in the country where your card was issued.

Most credit cards impose a hefty cash advance fee or processing fee for credit card cash withdrawals – typically around three percent of the sum you withdraw. There may also be a minimum withdrawal amount of around $14 to $27.

If you are taking out a large amount of cash on your credit card, you will also pay a cash advance interest rate, typically around three to five percent of the amount withdrawn. The cash advance rate is generally higher than interest rates offered by banks on personal loan, and that’s why it may be wiser to take out a personal loan instead of withdrawing cash from your credit card.

For example, for a $2,000 cash advance, you could end up paying $60 every month until you pay it off if the cash advance rate is three percent, or even $100 if the rate is five percent – this is on top of the $60 processing fee paid initially to the bank, which has a cash advance fee of three percent.

Table: Typical charges for withdrawing $2,000 on your credit card

Fee % charge Fee in USD
Cash advance/ processing fee 3% $60
Cash advance interest rate 3% $60
Total 6% $120

[Compare personal finance in UAE | Compare personal finance in Saudi Arabia]

Another downside of cash withdrawals is that you typically won’t benefit from the 55-day interest-free credit you get on purchases, but will start paying interest on the cash advance immediately.

Credit card cash withdrawal fees – abroad

While you’re travelling overseas, you don’t need to bother pre-ordering currency, and you avoid getting ripped off by those super-costly airport currency exchange booths.

Better still, Visa and MasterCard are accepted in shops and restaurants all over the world. And you can even withdraw cash when you need it from an ATM.

There’s only one tiny problem. Your card issuer and bank will slap on a string of charges, especially for credit card withdrawals, and foreign transactions while you’re away.

The moment you use your credit card in a country with a different currency, whether for purchases or cash withdrawals, your bank will hit you with a foreign exchange (forex) processing fee, also known as an overseas transaction fee. This will typically range from 1.5 to 2.85 percent for every dollar you spend, depending on the bank and card.

[Related: Foreign exchange fees: Using your credit card abroad]

As the table shows, you could easily pay up to $175 for each $2,000 you withdraw. That’s money you could have spent having fun on holiday.

Table: Typical charges for withdrawing $2,000 on your credit card overseas

Fee % charge Fee in USD
Cash advance/ processing fee 3% $60
Cash advance interest rate 3% $60
Foreign exchange processing/ overseas transaction fee 2.75% $55
Total 8.75% $175

Before you fly, find out what your bank charges. With a little effort, you should be able to find a list of credit card fees and international charges on its website, or give them a call. Is withdrawing money from your debit card cheaper than your credit card? Is it worth exchanging currency before you travel at your bank’s branch – and trying to negotiate a good deal with them if the amount is significant?

Using your debit card for cash withdrawals overseas can be slightly cheaper. You will still pay a foreign currency processing fee, but may escape the cash advance fee.

[Compare credit cards in UAE | Compare credit cards in Saudi Arabia]

If you plan to use your credit card overseas anyway, look out for cards that waive foreign currency transaction fees. The DNATA World Credit Card from Emirates NBD offers zero percent foreign transaction fees, but for a limited period only. And it still charges for cash advances. In Saudi Arabia, Al Rajhi credit cards all offer zero percent forex.

Holidays are a great way to escape from everyday life. Escaping from bank charges is a lot harder.