A cash advance lets you borrow money against your credit card's line of credit, but it costs more than a regular purchase
A cash advance is when you use your credit card to withdraw cash from an ATM, bank teller, or convenience store. The money comes from your available credit, not your checking account. You pay it back like any other credit card balance — but with higher fees and interest rates than you would pay on regular purchases.
The key difference: a purchase on your card gets a grace period (usually 21 to 25 days before interest starts). A cash advance starts charging interest the moment you withdraw it. There is no grace period. You also pay an upfront fee, typically 3 to 5 percent of the amount withdrawn, just to take the cash out.
Most people use cash advances when they need physical money urgently and have no other way to get it. But the cost is steep enough that it should be a last resort, not a habit.
Key Takeaways
- Cash advances charge interest from day one with no grace period, while regular purchases usually have 21 to 25 days before interest kicks in.
- You pay an upfront fee (typically 3 to 5 percent of the amount) just to withdraw the cash, on top of the interest rate.
- The interest rate on a cash advance is usually higher than your regular purchase APR — sometimes 5 to 10 percentage points higher.
- Your credit card issuer sets a separate cash advance limit, which may be much lower than your total credit limit.
- Paying off a cash advance takes longer because most card issuers explore your payments to the lowest-interest balance first.
The fees and interest rates that make cash advances expensive
When you take a cash advance, you face two costs when ready: the upfront fee and the daily interest.
The cash advance fee is a percentage of the amount you withdraw, charged the moment the transaction posts. Most cards charge between 3 and 5 percent. On a $500 withdrawal, that is $15 to $25 just to get the money. Some cards cap the fee at a flat amount (like $10 maximum), but most do not.
The cash advance APR (annual percentage rate) is the interest rate applied to the balance. This rate is almost always higher than your regular purchase APR. If your card charges 18 percent APR on purchases, the cash advance APR might be 23 or 28 percent. The card issuer sets both rates, and you can find them in your card's terms or by calling the customer service number on the back of your card.
Interest accrues daily from the moment you withdraw the cash. If you withdraw $500 at a 25 percent APR, you owe roughly $3.42 in interest per day. After 30 days without paying it back, you owe an extra $102.50 on top of the original $500 and the upfront fee.
How a cash advance limit differs from your credit limit
Your credit card has two separate limits: your credit limit (how much you can charge in total) and your cash advance limit (how much you can withdraw as cash). The cash advance limit is usually much smaller.
If your card has a $5,000 credit limit, your cash advance limit might be $500 or $1,000. The card issuer decides this limit based on your creditworthiness and account history. You can call the customer service number on the back of your card to find out your cash advance limit, or log into your online account.
If you try to withdraw more than your cash advance limit, the transaction will be declined. You cannot override this by using your full credit limit — the cash advance limit is a hard cap.
Where you can get a cash advance and what to expect
You have several options for withdrawing a cash advance:
- ATM: Insert your card and enter your PIN. Most ATMs charge an additional fee (usually $2 to $3) on top of your card's cash advance fee. This is the most common method.
- Bank teller: Go to any bank branch (yours or another bank) and ask for a cash advance. You will need your card and ID. The bank may charge its own fee in addition to your card's fee.
- Convenience store or grocery store: Some stores offer cash advances at the register when you make a purchase. You typically pay only your card's fee, not an additional store fee.
- Convenience check: Some card issuers send checks tied to your credit line. Writing one is treated as a cash advance, with the same fees and interest rate.
No matter which method you use, the transaction posts to your account within one to three business days. Interest starts accruing when ready. If you use an ATM, you will also see the ATM operator's fee appear separately on your statement — this is in addition to your card issuer's cash advance fee.
How payment applies when you have both purchases and a cash advance
This is where cash advances become especially costly. When you make a payment to your card, most issuers explore it to the balance with the lowest interest rate first. Since your regular purchases have a lower APR than your cash advance, your payment goes toward the purchase balance, leaving the cash advance to accrue interest at the higher rate.
Example: You have a $1,000 purchase at 18 percent APR and a $500 cash advance at 25 percent APR. You send in a $300 payment. The issuer applies the full $300 to the $1,000 purchase, leaving the $500 cash advance untouched to accrue interest at 25 percent. You keep paying interest on the cash advance at the higher rate until the purchase is paid off.
To avoid this, pay off the cash advance first, or request that your payment be applied to the cash advance specifically. Some card issuers allow you to direct where your payment goes if you call customer service or use their online portal. Check your card's terms or call to confirm whether your issuer allows this.
Alternatives to a cash advance when you need cash quickly
Before taking a cash advance, consider these lower-cost options:
- Debit card withdrawal: If you have a checking account, withdraw cash from your own account using your debit card. No fees, no interest.
- Personal loan: A personal loan from a bank or credit union typically has a lower interest rate than a cash advance APR. The process takes a few days, but the rate is usually much better if you have time.
- Paycheck advance app: Apps like Earnin or Dave let you borrow against your next paycheck for a small fee (usually $0 to $15). The interest rate is lower than a cash advance, though the fee structure varies.
- Credit union loan: If you are a member of a credit union, ask about a short-term loan or line of credit. Credit unions often offer lower rates than card issuers.
- Asking for help: Borrowing from family or friends costs nothing if they agree, though it can strain relationships.
- Negotiating with creditors: If you need cash because you are behind on bills, contact the creditor directly to discuss a payment plan or hardship program.
Each of these routes avoids the combination of upfront fees and high interest rates that make cash advances so expensive. Even a personal loan with a 15 percent APR costs less than a cash advance at 25 percent APR plus a 5 percent upfront fee.
How a cash advance affects your credit score
A cash advance itself does not directly damage your credit score, but it can indirectly. The withdrawal counts as a balance on your credit report, which increases your credit utilization ratio (the percentage of your available credit you are using). A higher utilization ratio can lower your score.
If you carry the cash advance balance and miss a payment, that missed payment will hurt your score. Late payments stay on your credit report for seven years. If the balance grows large enough that you default, the damage is even worse.
The best way to protect your score is to pay off the cash advance as quickly as possible, ideally within the same billing cycle. This keeps your utilization ratio low and prevents interest from compounding.
Frequently Asked Questions
Can I use a cash advance to pay another credit card?
Technically yes, but it is a bad idea. You would pay the cash advance fee (3 to 5 percent) plus the higher cash advance interest rate, just to move money between cards. You would be better off transferring the balance directly using a balance transfer, which usually has a lower fee and a promotional rate for the first few months.
What happens if I cannot pay back a cash advance?
The balance stays on your card and keeps accruing interest. If you miss payments, your credit score drops, and the card issuer may eventually charge off the account or send it to a collection agency. Contact your card issuer when ready if you cannot pay — many have hardship programs that can lower your interest rate or set up a payment plan.
Is there a way to avoid the cash advance fee?
No. The fee is automatic and non-negotiable. The only way to avoid it is to not take a cash advance. Some cards offer better rates or lower fees than others, but every card charges something for cash advances.
Does a cash advance count toward my credit limit?
Yes. If you have a $5,000 credit limit and take a $500 cash advance, you have $4,500 left to use for purchases. The cash advance is part of your total available credit.
Can I take a cash advance on a debit card?
No. Debit cards draw from your checking account, not a line of credit. You can withdraw cash from your account using a debit card at an ATM, but that is not a cash advance — it is your own money.