A cash advance on a credit card is a short-term loan against your credit limit, taken as cash rather than a purchase
When you use a cash advance, you withdraw money from an ATM or get cash from a bank teller using your credit card, just as you would with a debit card. The difference is that the money comes from your credit card's available balance, not a bank account. You owe that cash back to your credit card company, and they charge you for borrowing it — usually more than they charge for regular purchases.
The cash advance appears on your credit card statement as a separate transaction from your regular purchases. It has its own interest rate (called the cash advance APR), its own fees, and often its own payment schedule. Most credit cards treat cash advances differently from purchases, which means the terms are typically worse for you.
Key Takeaways
- Cash advances charge a higher interest rate than regular credit card purchases, often 3 to 5 percentage points above your standard APR.
- You pay an upfront fee — usually 3 to 5 percent of the amount withdrawn — on top of interest charges.
- Interest on a cash advance starts accruing when ready, with no grace period like you may have on purchases.
- The cash advance balance is treated separately from your regular purchases, so payments go toward whichever balance has the highest interest rate first.
How the fees and interest work
A cash advance typically costs you money in two ways: an upfront fee and ongoing interest. The upfront fee is charged the moment you withdraw the cash and ranges from 3 to 5 percent of the amount you take out. On a $500 cash advance, that means paying $15 to $25 just to get the money.
Interest begins accruing when ready — there is no grace period. If your regular credit card APR is 18 percent, your cash advance APR might be 24 percent or higher. That higher rate applies every single day from the moment you withdraw the cash until you pay it back in full. Unlike a purchase, where interest only starts if you carry a balance past the due date, a cash advance charges interest from day one.
Your credit card company decides how your payment is applied when you have both a regular balance and a cash advance balance. Most cards explore your payment to the lowest-interest balance first, which means your cash advance (the highest-interest debt) keeps accruing charges while you pay down the cheaper debt.
When cash advances appear on your credit report
A cash advance does not show up as a separate line item on your credit report the way an installment loan does. However, it counts toward your credit utilization — the amount of your total credit limit you are using. If you have a $5,000 credit limit and take a $1,000 cash advance, your utilization jumps to 20 percent, which can lower your credit score.
The cash advance itself is reported as part of your overall credit card balance. If you miss payments or carry the balance for months, that shows up in your payment history, which is the largest factor in your credit score. A cash advance that goes unpaid damages your score the same way any other credit card debt does.
Why cash advances cost more than other borrowing
Credit card companies charge more for cash advances because they see them as riskier. A purchase is tied to a specific item or service — the merchant has already delivered something. A cash advance is pure lending with no collateral, so the company protects itself by charging higher rates and fees.
Cash advances also bypass the merchant network, which means the credit card company has no chargeback protection or dispute mechanism. If something goes wrong, they have no recourse except to pursue you for repayment. That risk is passed to you in the form of higher costs.
Alternatives to a cash advance
If you need cash, a credit card cash advance is usually one of the most expensive ways to get it. A personal loan from a bank or credit union typically charges less interest and has a fixed repayment schedule, making it easier to budget. Even a payday loan, despite its poor reputation, may cost less than a cash advance if you repay it within two weeks.
If you have a savings account, withdrawing from savings costs nothing and does not create debt. If you need money for an emergency, a 0 percent balance transfer card (if you may have access to) lets you move existing credit card debt to a new card with no interest for a set period — though this does not help you get new cash. A line of credit from your bank, if you have one, typically charges less than a cash advance.
How a cash advance affects your budget
The real cost of a cash advance extends beyond the fees and interest. Because interest starts when ready and the rate is high, the debt grows quickly if you cannot pay it back within a month or two. A $500 cash advance at 24 percent APR costs about $10 in interest per month if you make no payment — and that is before the upfront fee.
If you are considering a cash advance, calculate the total cost first. Add the upfront fee to the interest you will pay based on how long you think repayment will take. Compare that to the cost of other borrowing options. In most cases, you will find that a cash advance is the most expensive choice available to you.
Frequently Asked Questions
Can I get a cash advance with any credit card?
Most credit cards allow cash advances, but the amount you can withdraw is usually limited to a percentage of your credit limit — often 20 to 50 percent. Some cards restrict cash advances to cardholders who have had the account open for a certain period. Check your card's terms or call the number on the back of your card to find out your cash advance limit.
What is the difference between a cash advance and a balance transfer?
A balance transfer moves debt from one credit card to another, usually at a lower interest rate for a promotional period. A cash advance gives you actual cash from your credit card at a higher rate and with an upfront fee. Balance transfers are for moving existing debt; cash advances are for getting new cash.
Does a cash advance hurt my credit score?
A cash advance itself does not hurt your score, but it increases your credit utilization, which can lower your score slightly. If you miss payments or carry the balance for a long time, that damage to your payment history will hurt your score more significantly. Paying off the cash advance quickly minimizes the impact.
Can I use a cash advance to pay bills?
Technically yes, but it is expensive. You pay the upfront fee and high interest rate just to convert your credit limit into cash. If the bill accepts credit card payments directly, charging the bill to your card costs less than taking a cash advance and paying with that cash.