Cash Advance
What Is a Cash Advance?
A cash advance is when you use your credit card to withdraw cash instead of making a purchase.
It may sound convenient, but it’s one of the most expensive ways to borrow money.
Cash advances usually come with:
- Higher interest rates
- Immediate interest charges (no grace period)
- Transaction fees
- ATM fees
How a Cash Advance Works
You can typically get a cash advance by:
- Withdrawing cash at an ATM using your credit card
- Using convenience checks from your credit card issuer
- Transferring funds to your bank account
The amount you can withdraw is usually limited to a portion of your total credit limit.
Why Cash Advances Are Expensive
Most credit cards separate their interest rates:
- Purchases: Standard APR
- Balance Transfers: Promotional or standard APR
- Cash Advances: Higher APR
Cash advance APRs are often significantly higher than purchase APRs — and interest begins accruing immediately.
Many major issuers like Chase and American Express charge:
- 3%–5% transaction fee
- No grace period
- Higher APR than regular purchases
That combination makes cash advances costly very quickly.
Example of a Cash Advance Cost
Let’s say you withdraw $1,000 as a cash advance:
- 5% fee = $50 immediately added
- Higher APR begins immediately
- Interest accrues daily
If you don’t pay it off quickly, that $1,000 can become much more expensive than expected.
Alternatives to a Cash Advance
Instead of a credit card cash advance, consider:
- Emergency savings
- Personal loan with lower APR
- Credit union short-term loan
- Negotiating payment plans
- Asking for due date extensions
For credit union members, organizations like National Credit Union Administration regulate many institutions that offer small-dollar loan programs designed to avoid predatory fees.
When a Cash Advance Might Make Sense
Rarely — but possibly:
- Short-term emergency
- You can repay it immediately
- No other access to funds
Even then, read the terms carefully.
FAQs About Cash Advances
Does a cash advance hurt your credit score?
Indirectly. It increases your credit utilization, which may lower your score.
Is a cash advance the same as a payday loan?
No. A payday loan is separate and typically more expensive.
Do all credit cards allow cash advances?
Most do, but limits and fees vary.
Is there ever a grace period?
Almost never. Interest usually starts immediately.
Related Terms
