Being able to access cash without visiting your bank is very convenient, so it is not surprising that the number of credit card cash advances being obtained using credit cards has increased steadily year on year. According to Swiss National Bank statistics, Swiss credit cards were used to withdraw around 954 million Swiss francs in Switzerland between September 2016 and September 2017 alone.
That number may be dwarfed by nearly 28 billion francs withdrawn in Switzerland using Swiss debit cards (like Maestro and Postfinance debit cards) the same year, but it is important to note the difference in costs. Swiss debit card users do not pay a fee to withdraw Swiss francs at ATMs in their bank’s network and some banks do not charge for out-of-network withdrawals. Swiss credit cards, on the other hand, typically charge a cash advance fee equal to 3.75% of the amount you withdraw – with a minimum fee of 5 francs per withdrawal.
If you were to apply the typical fee of 3.75% to the approximately 954 million francs worth of credit card cash advances obtained over the September 2016 – September 2017 period, you could estimate that Swiss consumers would collectively have paid somewhere in the realm of 36 million francs in cash advance fees during that period. While the average cash advance over the above-mentioned period was around 256 francs, it is fair to say that many cash advances were smaller than that. For smaller advances, the typical 5-franc minimum fee can be much more than 3.75% of the amount withdrawn.
Are cash advance fees avoidable?
Whether or not you can avoid cash advance fees depends on which credit card you use and where you get cash advances.
Credit cards issued by Swiss card issuer Viseca on behalf of Swiss cantonal banks, Raiffeisen banks, Bank Cler, Migros Bank and many regional banks (including Clientis banks and Valiant bank) can be linked to your private account at the co-issuing bank using the Direct Debit option. By activating this option, you give the bank permission to debit your private account directly every time you withdraw cash using your credit card. This is not the default option, so you will have to specifically ask your bank to activate it. If you are applying for a new credit card, you may be able to select the option on the application form.
Once the Direct Debit option has been activated, each cash withdrawal from a Swiss ATM will be treated as a withdrawal rather than an advance. By activating this option, you turn your credit card into a debit card insofar as withdrawing money is concerned. You can then withdraw money at in-network ATMs at no charge, just as you would with a debit card. Withdrawals at out-of-network ATMs may command a fee, depending on your bank. Cantonal banks typically charge a 2-franc fee for each withdrawal from out-of-network ATMs. In any case, you will not pay more to use your credit card with the Direct Debit option activated than you would to use your debit card from the same bank.
If you use a Migros Cumulus card, you can get cash advances at the till at Migros supermarkets and other stores in the Migros group without paying any cash advance fee. With over 1100 Migros stores around the country, finding a till at which to get free cash advances is not difficult – at least during business hours. The size of cash advances is subject to availability of money at the store, so large stores are a safer bet for very large cash advances.
Are there benefits to using a credit card for cash withdrawals?
As a general rule, credit card issuers do not reward you with points, miles or cash back for the cash advances you make. You also do not normally benefit from the insurance benefits which may apply to purchases (purchase protection and price protection, for example).
The main benefit of linking your credit card to your account is that if you are in the habit of getting cash using your credit card, you will no longer be charged the excessive cash advance fees. If you only really use your debit card to make cash withdrawals in Switzerland, linking your credit card to your private account replaces the need for a debit card. Most banks in Switzerland charge annual fees of 30 or 40 francs for their debit cards, and you can avoid that fee by using your credit card as a debit card rather than holding both. When you use your credit card to pay for purchases, you may benefit from rewards and insurance perks which you do not get with debit cards. Credit card are also far more widely accepted for online purchases. In short, by activating Direct Debit, you get the best of both worlds on a single card with a single annual fee.
Important: If you use your debit card to withdraw money outside of Switzerland, then you should hang on to it, as the Direct Debit credit card option only applies to withdrawals at Swiss ATMs. Withdrawals outside of Switzerland are treated as cash advances and you pay a cash advance fee (plus a foreign transaction fee), even with the Direct Debit option activated.
If you are willing to stick to get cash advances at Migros stores using a Migros Cumulus Mastercard rather than making cash withdrawals from a private account, you can save a lot of money because the Migros Cumulus Mastercard does not have an annual fee (unlike most debit cards). This is especially true if you use a free “online” bank account which does not have an annual fee if you do not use a debit card.
Important: This option may not make sense if you are in the habit of making very large cash withdrawals in a single transaction, as cash advances are limited by availability of cash. You should also note that when you use a Migros Cumulus Mastercard to get cash advances at banks, ATMs, and any locations other than Migros store tills, you pay a cash advance fee equal to 3.75% of the amount you withdraw or 5 francs – whichever is higher.
What to pay attention to when using a credit card
When you pay for purchases using a credit card, the money is not deducted from your private account. The Direct Debit option (in the case of Viseca cards) only applies to cash withdrawals, not to purchases paid for using the card. You are billed for all of your purchases at the end of the billing cycle (every month) as is standard with credit cards.
Even if your credit card is linked directly to your private account (the Direct Debit option), you should always avoid using your credit card to get cash while traveling outside of Switzerland. You can find more information in the moneyland.ch guide to travel and credit cards.