What is Cash Advance and How Does It Work?

What is Cash Advance and How Does It Work?

Singapore might be one of the most expensive countries in the world, but it doesn’t mean Singaporeans, foreign workers, and tourists have no access to supplementary cash services. Cash advance services are available for Singaporeans from banks and financial institutions. On the other hand, foreigners can use their credit cards — for a fee — in foreign establishments.

However, cash advance in Singapore is a service that goes beyond banks and established financial institutions. When you’re in Singapore — and virtually in any country — you can find these cash advance services and use them to your advantage.


What is Cash Advance?

The term “advance” talks about moving forward or speeding towards an objective. Performing a cash advance is to request an amount of money ahead of time. However, this is a service that comes with a fee, usually with an interest rate and an available credit limit.

Banks and financial institutions offer cash advance services through a line of credit or credit card. These allow you to get the cash equivalent to 30-50% of your total income if you’re a first-time cardholder. Licensed moneylenders can offer your payday loans. We’ll talk about this in detail later.


How a Cash Advance Works

A cash advance works when you approach a bank, financial institution, or licensed moneylender to apply to use these services. If you have favorable credit reports with banks, you have the highest likelihood of having a cash advance loan approved. Moneylenders only offer fast-cash advance services called payday and personal loans, each having varying loan terms and interest rates.

Your credit card allows you unimpeded passage to a line of credit. However, its equivalent is often 30-50% of your total income.

On the other hand, payday loans and personal loans require you to submit a small requirement number each time you borrow money, but they offer 1-6 months of your monthly salary as loan limits.


Cash Advance Types Available in Singapore

1. Credit Card Cash Advances

Virtually every bank in Singapore offers credit cards. Additionally, they have a specific credit card set for frequent flyers, young shoppers, elderly and luxury spenders, and thrifty savers. A credit card’s purpose is to encourage purchases through a convenient line of credit, reward points systems, and added perks and bonuses with select or partnered merchants.

It pays to be aware that credit card cash advances have led numerous Singaporeans into deep debt. It’s the fastest way to upgrade or downgrade your credit ratings, making it essential to keep a close eye on your credit card spending. Plus, always remember: credit cards have annual fees above your monthly spending.

2. Merchant Cash Advances

On the business side, merchant cash advances allow owners to borrow money from banks. In return, the business will cooperate with banks regarding credit card promotions and bonuses. Additionally, they’ll pay a percentage of credit card sales to the bank.

This is an easy cash advance process allowing borrowing businesses to tide over specific fiscal difficulties immediately. The credit card promotions and bonuses have low effects on their everyday sales and profits, allowing them to pay on banks on time and completely.

3. Payday Loans

Merchant cash advances and payday loans are virtually similar. However, payday loans focus on individual Singaporeans and foreigners. Time-bound payments will not permit delays, and borrowers can use payday loans to address these immediate billing and debt concerns to avoid ballooning debt and disconnections.

in Singapore, most freelance workers have great use for payday loans because of their salary’s nature. If they submit proof of employment and invoice receivables, licensed moneylenders can provide them a month’s worth of salary to address their billing concerns.


Cash Advance Pros and Cons


1. Emergency Funding

At some point, everyone faces an emergency, and the amount you set aside is sometimes insufficient to address all financial concerns. Having a credit card to make an urgent appliance purchase through installment is useful, especially if you have a dire need for it.

On the other hand, payday and personal loans can help borrowers who need medical financial aid. The country has the best and most expensive healthcare technologies and facilities in the world, and having 1-6 months of your salary on hand guarantees you can pay for all the necessary expenses.

2. Short-Term Loans

Credit cards, merchant cash advances, and payday or personal loans are short-term loans that do not go beyond 1-12 months. Therefore, you have a low risk of having a per-annum interest rate, but credit cards have a fixed annual fee that does not change regardless of your spending or existing debt.

By nature, short-term loans are easy to manage than long-term debt. Banks and other financial institutions require no in-depth and futures risk assessment for short-term loan borrowers. Instead, they opt for a high-interest rate as a safeguard, which responsible borrowers can never manage to flag.

3. Any Situation a One-Month Loan Amount Is Sufficient

You can opt for a credit card for any short-term purchase despite having a loan limit less than your monthly income. On the other hand, payday loans can help you address utility bills and high-interest debt for a single month or pay cut. If you need more cash, licensed moneylenders can provide you with a personal loan, allowing you to have one full year as a loan term.

Cash advance services are most useful for one-year loan terms. Anything beyond requires a new contract to ensure it covers both borrower and lender rights comprehensively.


1. Low Loan Limits

Banks and financial institutions never meant cash advances to go beyond a single month or year of repayments. Additionally, these are collateral-less transactions because banks bind their decisions on your current employment state, income, bank account money, and perceived sense of liability.

Credit cards require you to have high credit ratings, but you’ll still begin with low loan limits. To upgrade using your credit card, you’ll have to show excellent financial management behavior throughout its use. However, banks accordingly categorize credit cards with different loan limits, and those above your one-month salary have more expensive annual fees.

2. Impractical and Non-Flexible Payment Terms

A cash advance’s objective is to tide you over an existing financial difficulty. For example, if your refrigerator suddenly shut down, a credit card with sufficient loan limits can help you with its 12-months, 0% interest payment plan with select merchants. A payday cash advance can help you pay before utility disconnect or debt interest and penalty fees implement themselves.

Therefore, their policies are rigid and inflexible. Everything in your contract is set in stone. However, licensed moneylenders are willing to tailor specific financial products and services for preferred borrowers. On the other hand, such a system works similar to credit cards — you’ll need to use the lender’s services repeatedly to earn financing flexibility.

3. High Interest

All credit card advances, payday loans, and other fast-cash products have high-interest rates because they’re unsecured loans. Plus, it can become more difficult because banks and other lenders will not permit collateral tied to cash advance services too.


Is Cash Advance Bad For Your Credit?

A single loan can work excellently in improving your credit scores. However, banks and other lenders increase your risk level and downgrade your scores if you take out multiple loans and credit lines. Cash advance services aren’t bad as long as you can manage all of them effectively.


Can You Get Cash Advance From a Bank?

Cash advance comes in the form of credit cards or credit lines from banks. You can quickly apply for these using the bank or financial institution’s respective application portals and submitting all necessary requirements and documentation.


Average Cost of Cash Advance

Here are the average cash advance fees you can get. Check this table when you’re comparing in-country rates!

Bank Cash Advance Fee Interest Rates
HSBC 5% or S $15 whichever is higher 24% APR Charged Daily
Maybank 5% or S $15 whichever is higher 24% APR Charged Daily
American Express 5% 24% APR Charged Daily
ANZ 5% or S $15 whichever is greater 28% APR Charged Daily
Standard Chartered 6% or S $15 whichever is higher 24% APR Charged Daily
UOB 6% or S $15 whichever is higher 28% APR Charged Daily
DBS 6% or S $15 whichever is higher 28% APR Charged Daily
OCBC 6% or S $15 whichever is higher 28.92% APR Charged Daily
CIMB 6% or S $15 whichever is higher 28% APR Charged Daily
Citibank 6% or S $15 whichever is higher 29.9% APR Charged Daily


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