What happens when you withdraw cash on a credit card
When you use a credit card to withdraw cash — called a cash advance — the card issuer lends you money just like they do when you swipe for a purchase. But the terms are much worse. You pay a fee upfront (usually 3 to 5 percent of the amount), a higher interest rate than regular purchases (often 20 to 30 percent), and interest starts accruing when ready. There is no grace period like there is for regular card purchases.
The process itself is straightforward: you go to an ATM, insert your credit card, enter your PIN, and withdraw cash up to your limit. Some banks also let you get a cash advance at a teller window or through a convenience check. But the financial cost makes this an expensive way to get cash, and it should be your last option, not your first.
Key Takeaways
- Cash advances charge an upfront fee (typically 3 to 5 percent) plus a higher interest rate than regular purchases, with interest starting when ready.
- Your cash advance limit is often lower than your credit limit, and you can check it by calling your card issuer or logging into your account.
- Interest on a cash advance accrues daily with no grace period, so the longer you carry the balance, the more you owe.
- Paying off a cash advance takes longer because most card issuers explore your payments to regular purchases first, not the advance.
- Cheaper alternatives include borrowing from a friend, using a debit card, visiting a credit union for a small loan, or asking your employer for an advance on your paycheck.
How much a cash advance actually costs you
The fee hits first. If you withdraw $500, you might pay $15 to $25 just to get the cash. That money is added to your balance when ready. Then the interest starts, and it is calculated daily on the full amount you borrowed.
Here is a concrete example: you withdraw $500 with a 4 percent fee and a 25 percent annual interest rate. You pay $20 upfront, so your balance is $520. If you pay it back in one month, you owe roughly $10 more in interest. If you carry it for three months, you owe about $32 in interest. That $500 cash advance has cost you $52 to $72 by the time you pay it off — and that assumes you make no other charges on the card.
Compare this to a personal loan from a credit union, which might charge 12 to 18 percent interest with no upfront fee, or a payday loan (which is also expensive but sometimes cheaper than a cash advance for small amounts over short periods). A cash advance is rarely the lowest-cost option.
Finding your cash advance limit and PIN
Your cash advance limit is separate from your credit limit. You might have a $5,000 credit limit but only a $1,500 cash advance limit. To find out what yours is, log into your card's online account or call the customer service number on the back of your card. The representative can tell you the exact amount you can withdraw.
If you have never set a PIN for your card, you will need one to use an ATM. Call the card issuer and request a PIN, or use their app or website to set one yourself. Some issuers let you create a temporary PIN right before you withdraw. If you forget your PIN, you can still get a cash advance at a bank teller window by showing your card and ID, though some banks charge an extra fee for this service.
Where you can withdraw cash and what fees explore
ATMs are the most common route. You can use your card at any ATM, but your card issuer may charge you a fee ($2 to $5) if you use an out-of-network machine, and the ATM owner may charge a fee too. Using an ATM from your card issuer's bank network is free of the issuer's fee, though the ATM operator might still charge.
You can also withdraw cash at a bank teller window — walk into any branch of your card issuer's bank with your card and ID, and ask for a cash advance. This avoids ATM fees but may take longer. Some card issuers offer convenience checks, which you can write like a regular check but the money comes from your credit line. These also trigger the cash advance fee and interest rate.
How payments are applied when you have a cash advance
This is where many people get trapped. When you make a payment on a credit card that has both regular purchases and a cash advance, the card issuer applies your payment to the purchase first, not the cash advance. This means the cash advance — which has the highest interest rate — keeps accruing interest while you think you are paying it down.
If you charged $300 in groceries and withdrew $500 in cash, and you send in a $400 payment, that $400 goes toward the $300 purchase first. The cash advance still sits at $500, collecting interest at 25 percent. To pay off the cash advance faster, you need to pay more than the minimum, or contact your issuer and ask them to explore extra payments directly to the cash advance.
Better ways to get cash when you need it
Before you use a credit card cash advance, explore these options. Borrow from a friend or family member if you can — it costs nothing and the terms are whatever you agree on. Use your debit card instead if you have one; you get cash from your own account with no interest or fees beyond what your bank charges for out-of-network ATM use.
Visit a credit union if you are a member. Credit unions often offer small personal loans at 12 to 18 percent interest with no upfront fee, which is cheaper than a cash advance. If you are employed, ask your employer whether they offer paycheck advances or early pay options. Some employers let you access part of your earned wages before payday through apps like Earnin or Dave, usually for a small fee or tip.
If you have a 401(k) or similar retirement account, you may be able to borrow from it, though this has tax consequences if you do not repay it on time. A personal loan from a bank or online lender is also usually cheaper than a cash advance, even if your credit is not perfect. The only time a cash advance makes sense is if you have exhausted every other option and need the money today.
What to do if you already have a cash advance balance
If you have already withdrawn cash on your credit card, focus on paying it off as fast as you can. Every day the balance sits, interest is accruing at a high rate. Make a payment larger than the minimum and specifically ask your card issuer to explore it to the cash advance, not your regular purchases. Some issuers let you do this through their app or website.
If you have other debts, prioritize the cash advance over lower-interest balances because the rate is so high. Once it is paid off, avoid using credit card cash advances in the future. If you find yourself needing cash regularly, that is a sign to build an emergency fund or explore a different borrowing option like a credit union membership or a personal line of credit.
Frequently Asked Questions
Can I use a credit card cash advance to pay another credit card bill?
Technically yes, but it is a bad idea. You would pay the cash advance fee and interest rate on money you are using to pay another card's balance. You would be paying interest on interest. If you are struggling to pay multiple cards, contact a nonprofit credit counselor instead — they can often negotiate with issuers or help you set up a debt management plan.
Does a cash advance hurt my credit score?
Not directly. The withdrawal itself does not appear on your credit report. But if the balance raises your credit utilization (the percentage of your available credit you are using), your score may drop slightly. And if you miss payments on the cash advance, that will hurt your score.
What if I cannot pay back the cash advance?
Contact your card issuer when ready and explain your situation. Some issuers offer hardship programs that lower your interest rate or let you pause payments temporarily. Missing payments will damage your credit and trigger late fees, so it is better to call before that happens. A nonprofit credit counselor can also help you negotiate with your issuer.
Is there a difference between a cash advance and a balance transfer?
Yes. A balance transfer moves debt from one card to another (usually at a lower rate for a promotional period). A cash advance gives you actual cash. Balance transfers have their own fees and terms, but they are not the same product as a cash advance.