What Is a Cash Advance on a Credit Card?

If you need quick access to cash, a cash advance on your credit card could be the answer. However, it usually comes with higher costs than using your card for purchases. 

Before using one, it can help to understand how cash advances work, what they cost, and if there are alternatives that could be a better option.

What is a credit card cash advance?

A cash advance on a credit card is a way of borrowing cash against your credit limit. Instead of using your card to make a purchase, you use it to withdraw money or transfer funds to your bank account as cash.

Compared to using your card to make a purchase, cash advances often come with a higher interest rate, additional fees, and no grace period, making them a more expensive way to borrow.

How does a cash advance on a credit card work?

A credit card cash advance works differently from a standard credit card purchase. Instead of using your card to buy goods or services, you use it to withdraw cash through your credit card account.

When you take a cash advance, the amount is added to your credit card balance and needs to be repaid under the card’s terms. Most cards have a separate cash advance limit, which is often lower than the total amount you can spend on purchases.

Cash advances also tend to cost more than regular card transactions. In many cases, the cash advance Annual Percentage Rate (APR) is higher than the purchase APR, and you start accruing interest from the day the cash is withdrawn.

Because of this, a cash advance can become expensive quickly if the balance is not repaid as soon as possible. Before using one, check your card’s terms so you understand the limit, fees, and interest charges that apply.

How to get a cash advance on a credit card

If your credit card allows cash advances, there are several ways you may be able to access the funds.

• ATM withdrawal: One of the most common ways to get a cash advance is through an ATM. You will need a PIN for your credit card, and the amount available may be limited by your card issuer or the ATM provider.
• Bank or credit union teller: You may also be able to request a cash advance in person at your bank or credit union. In some cases, this can allow you to access more than you can get from an ATM.
• Convenience check: Some credit card issuers provide convenience checks that let you draw against your credit card account. Using one of these checks is usually treated the same as a cash advance.
• Online transfer: Depending on your card, you may be able to transfer cash from your credit card to your bank account. This is generally also treated as a cash advance and can come with the same fees and interest charges.

Before using a credit card cash advance, be sure you check your card terms so you understand the limit, fees, and APR that apply.

What are the costs of a credit card cash advance?

A credit card cash advance can cost more than a standard credit card purchase. In many cases, a cash advance comes with a higher interest rate, a withdrawal or transfer fee, and no grace period, which can make it an expensive way to borrow.

Cash advance APR

Many credit cards charge a higher APR for cash advances than for regular purchases. This means the cost of borrowing cash can build up if you do not repay the balance quickly.

The APR for a cash advance is usually specified in your credit card terms. If your card has different rates for purchases and cash advances, the cash advance rate is usually the higher of the two.

Cash advance fee

Card issuers often charge a fee each time you take a cash advance. This fee can be based on a percentage of the amount withdrawn, although some cards also apply a minimum charge.

Because this fee is added at the time of the transaction, it increases the total amount you owe straight away. Even a relatively small cash advance can become more expensive once the fee is included.

ATM or bank fees

If you access a cash advance through an ATM or from a bank teller, you may also be charged an additional fee by the ATM operator or bank. This can increase the total cost beyond the fee charged by your card issuer.

The exact amount can vary depending on where and how you access the money. Before taking out a cash advance, it can help to check whether any third-party fees may apply.

No grace period

Unlike regular credit card purchases, cash advances usually do not come with a grace period. This means interest may begin to accrue from the day the cash is withdrawn, rather than after your payment due date.

With standard purchases, you can avoid interest by paying your statement balance in full on time. Cash advances do not usually include this grace period, which is one reason they can become expensive more quickly.

Because several charges can apply at once, a cash advance can cost more than expected. Reviewing your card terms in advance can help you understand the total cost before using this option.

Pros and cons of credit card cash advances

A credit card cash advance can be useful, but it also comes with potential downsides you need to be aware of. Understanding the pros and cons can help you decide whether this is the right option for you.

Pros of credit card cash advances

• Can provide quick access to cash
• Uses an existing credit card account, so you don’t need to make a new loan application
• Can be useful in a short-term emergency when other options are limited
• May be available through an ATM, bank, or online transfer

Cons of credit card cash advances

• Usually comes with a higher APR than regular credit card purchases
• Often includes a cash advance fee and possible ATM or bank fees
• Interest may begin accruing immediately, with no grace period
• The available cash advance limit is often lower than your total credit limit
• Can become expensive quickly if the balance is not repaid soon

Alternatives to a cash advance on a credit card

A credit card cash advance is not the only way to access money quickly. Depending on your situation, another option may come with lower costs or more favorable repayment terms.

• Personal loan: A personal loan may offer a lower interest rate than a credit card cash advance, and could allow you to borrow a larger amount.
• Borrowing from friends or family: This can be a lower-cost option if someone you trust is able to help. It may still be a good idea to agree on clear repayment terms in advance.
• Short-term loan: A quick loan or other short-term borrowing option can help when you need money fast. Before applying, compare the total cost and repayment terms with a cash advance.
• Borrowing from savings: If you have emergency savings available, using them may help you avoid interest charges and fees altogether.
• Payment plan or hardship support: If you need money to cover a bill, your provider may offer a payment plan or temporary hardship arrangement. This could help you manage the cost without taking on new debt.

Exploring alternatives first may help you find a better option and avoid the fees and immediate interest charges that often come with a credit card cash advance.

Should you use a credit card for a cash advance?

Using a credit card for a cash advance may be an option if you need cash quickly and do not have a lower-cost alternative available. Because it uses your existing credit card account, it can be a convenient way to access money in an emergency.

However, that convenience can come at a high cost. Cash advances often have a higher APR than regular purchases, may include additional fees, and usually start accruing interest straight away. This can make them an expensive way to borrow if you cannot repay the balance quickly.

Before using a credit card for a cash advance, compare the total cost with other options and think carefully about how soon you can repay what you borrow. If the cost or bill can wait, a cash advance is probably not the right choice.