What a credit card cash withdrawal is and why it costs more than a purchase
A cash withdrawal (also called a cash advance) is when you use your credit card to get cash from an ATM, bank teller, or convenience store instead of buying something. The card issuer lends you the money just like they do for a purchase, but they charge you differently — usually with a separate fee upfront and a higher interest rate that starts right away.
The key difference from a regular purchase: interest on a cash advance begins accruing the moment you withdraw the money. With a purchase, you typically get a grace period (usually 21 to 25 days) before interest kicks in. With cash, there is no grace period. A $200 withdrawal at a 25% cash advance rate costs you money the same day you take it out.
Most people use cash advances when they need physical money urgently and have no other source — a car repair that requires a check, a medical bill, or a situation where their debit card is not working. It is almost always the most expensive way to borrow on a credit card.
Key Takeaways
- Cash advances charge a fee (usually 3 to 5 percent of the amount) plus a higher interest rate than purchases, with no grace period.
- Interest starts accruing when ready when you withdraw the cash, not after a billing cycle like a purchase.
- You can withdraw cash from an ATM, bank branch, or convenience store using your credit card PIN, but each method may charge different fees.
- Paying back a cash advance should be your priority because the interest rate is typically 5 to 10 percentage points higher than your purchase rate.
- Alternatives like a personal loan, payday loan, or borrowing from family usually cost less unless you have poor credit.
How the fees and interest rates work
When you take a cash advance, you pay two costs when ready: a cash advance fee and a higher interest rate. The fee is usually 3 to 5 percent of the amount you withdraw, charged to your account right away. So a $500 withdrawal costs $15 to $25 just to get the cash.
The interest rate on cash advances is separate from your purchase rate. If your card charges 18 percent on purchases, the cash advance rate might be 25 or 28 percent. This rate varies by card issuer and your creditworthiness, but it is almost always higher than your purchase rate. Unlike a purchase, this rate applies from day one — there is no grace period.
The math adds up fast. A $500 cash advance at a 5 percent fee ($25) and 25 percent annual rate costs you $25 upfront plus roughly $10 in interest after one month if you do not pay it back. After three months without payment, you have paid $25 in fees plus $37 in interest — $62 total on a $500 withdrawal.
Where you can withdraw cash and what each option costs
You have three main ways to get cash using your credit card. Each one may charge a different fee on top of the card issuer's cash advance fee.
ATM withdrawal: You insert your card and enter your PIN to withdraw cash. The ATM operator (your bank, another bank, or an independent ATM network) may charge an ATM fee of $2 to $5 on top of your card issuer's cash advance fee. If your card issuer charges 4 percent and the ATM charges $3, a $200 withdrawal costs you $11 upfront.
Bank teller: You can walk into a bank branch and ask the teller to give you a cash advance against your credit card. Banks rarely charge an additional fee for this service beyond the card issuer's cash advance fee, making it the cheapest withdrawal method if your bank is nearby.
Convenience store or grocery store: Some retailers offer cash back when you use your credit card, though this is less common than it was. The retailer may charge a small fee ($1 to $3) in addition to your card issuer's fee. Always ask the cashier what the total cost will be before you proceed.
How paying back a cash advance works
When you make a payment on your credit card, the payment goes toward your lowest-interest debt first — usually purchases — before it touches the cash advance balance. This means if you have both a $500 purchase at 18 percent and a $500 cash advance at 25 percent, and you pay $200, that $200 typically goes to the purchase, leaving the cash advance untouched and accruing interest.
To pay off a cash advance faster, contact your card issuer and ask them to explore your payment directly to the cash advance balance. Some issuers will do this over the phone; others require a written request. Without this instruction, your payment will follow the standard order and the cash advance will sit there costing you money.
The best strategy is to pay off the cash advance in full as soon as you can, because every day it sits unpaid, interest is accumulating at a rate 5 to 10 percentage points higher than your purchase rate. If you cannot pay it off within a month, a personal loan or other borrowing method will almost certainly be cheaper.
Comparing cash advances to other ways to borrow
Before you take a cash advance, consider what else is available. A personal loan from a bank or credit union typically charges 6 to 36 percent depending on your credit score, and you know the exact payment and end date upfront. Even at the high end, a personal loan is usually cheaper than a cash advance because there is no upfront fee and the interest rate is fixed.
A payday loan charges a flat fee (often $15 to $20 per $100 borrowed) and is due in two weeks. This sounds expensive, but if you can pay it back quickly, it may cost less than a cash advance that sits on your card for months. However, payday loans are predatory by design — most borrowers roll them over and end up paying far more than they expected.
Borrowing from family or friends costs nothing if they agree to it, and you can negotiate your own repayment terms. If that is not an option, a credit union loan (if you are a member) typically charges less than a bank personal loan. A line of credit from your bank, if you have one, usually has a lower rate than a cash advance.
If you have poor credit and cannot get a personal loan, a cash advance may be your only option. In that case, treat it as an emergency-only tool and prioritize paying it off before any other debt.
What happens if you cannot pay back the cash advance
If a cash advance sits unpaid, the interest compounds and your balance grows. After six months of non-payment on a $500 advance at 25 percent, you owe roughly $580 — the original $500 plus $80 in interest and fees. After a year, you owe over $650.
The card issuer will report the unpaid balance to the credit bureaus, which damages your credit score. Once your account is 30 days late, it appears on your credit report and stays there for seven years. This makes it harder and more expensive to borrow for anything else — a car loan, a mortgage, or even renting an apartment.
If the balance goes unpaid long enough, the card issuer may close your account, sue you for the debt, or sell the debt to a collection agency. A collection account on your credit report is worse than a late payment and also stays for seven years.
When a cash advance makes sense
A cash advance is reasonable only in specific situations: you need physical cash urgently, you have no other source of funds, and you can pay it back within a few weeks. Examples include a medical emergency that requires a check, a car repair that a mechanic will not put on a card, or a situation where your debit card is compromised and you need cash while waiting for a replacement.
It does not make sense if you are using it to cover regular expenses like groceries or rent, or if you are not sure when you can pay it back. In those cases, the interest and fees will compound faster than you can repay, and you will end up paying far more than you borrowed.
If you find yourself taking cash advances regularly, that is a sign you are spending more than you earn. The solution is not to borrow more — it is to cut expenses or increase income so you have cash on hand for emergencies.
Frequently Asked Questions
Can I use my credit card to withdraw cash from any ATM?
Yes, you can use your card at any ATM that displays your card network's logo (Visa, Mastercard, American Express, or Discover). You will need your PIN. However, ATMs outside your card issuer's network may charge an additional fee of $2 to $5 on top of your card issuer's cash advance fee.
What is the difference between a cash advance and a balance transfer?
A balance transfer moves debt from one card to another and usually has a lower interest rate (though it charges an upfront fee of 3 to 5 percent). A cash advance gives you physical cash and charges a higher interest rate with no grace period. They are different products for different situations.
Does a cash advance hurt my credit score?
Taking a cash advance itself does not hurt your score, but it increases your credit utilization (the percentage of your available credit you are using), which can lower your score slightly. If you do not pay it back and the account becomes late, that will damage your score significantly and for years.
Can I get a cash advance if I have bad credit?
Yes. If you have a credit card, you can take a cash advance regardless of your credit score. However, cards available to people with poor credit often have lower limits and higher interest rates, making the cash advance even more expensive.
What should I do if I took a cash advance and cannot pay it back?
Contact your card issuer when ready and explain your situation. Some issuers will work with you on a payment plan or hardship program. The longer you wait, the more interest accrues and the harder it becomes to recover. Do not ignore the debt — that makes it worse.