What a credit card cash advance is and how it works
A cash advance is when you borrow money directly from your credit card issuer using your card's cash advance limit. You walk into an ATM or bank, insert your card, and withdraw cash — just like a debit card. The money hits your account when ready, but the debt appears on your credit card statement as a separate line item, not a purchase.
The catch is that cash advances cost more than regular purchases. You pay an upfront fee (usually 3 to 5 percent of the amount withdrawn), interest starts accruing the same day with no grace period, and the interest rate is typically higher than your purchase APR. If you withdraw $500, you might pay $15 to $25 just to get the cash, then pay interest on the full $500 from day one.
Credit card companies set a cash advance limit separate from your credit limit. You might have a $5,000 credit limit but only a $1,500 cash advance limit. You can find your limit in your card's terms, your online account, or by calling the number on the back of your card.
Key Takeaways
- Cash advances charge an upfront fee of 3 to 5 percent plus a higher interest rate than purchases, with no grace period before interest starts.
- You can withdraw cash at an ATM, bank teller, or through a cash advance check, but your cash advance limit is usually much lower than your credit limit.
- Interest begins accruing when ready, so the longer you carry the balance, the more you pay in fees and interest combined.
- A personal loan, payday loan alternative, or credit union loan typically costs less than a credit card cash advance for the same amount.
Where and how to withdraw a cash advance
You have three main routes to get the cash. The first is an ATM: insert your card, select "cash advance" or "withdraw cash," enter your PIN, and choose the amount. The ATM will show you the fee before you confirm. This is the fastest method and works 24/7.
The second is a bank teller. Walk into any bank branch (yours or another bank), hand over your card, and ask for a cash advance. The teller will process it on the spot. This method works during business hours and may allow you to withdraw more than an ATM limit in a single transaction.
The third is a cash advance check. Your credit card issuer may mail you blank checks tied to your cash advance limit. You write one to yourself, deposit it in your bank account, and the money appears there. This method is slower (takes a few days to clear) but useful if you need the money in your checking account rather than as physical cash.
Fees and interest you will pay
The upfront fee is non-negotiable and appears on your statement when ready. It ranges from 3 to 5 percent of the amount withdrawn — so a $500 advance costs $15 to $25 before you pay a cent in interest. Some cards charge a flat fee instead (like $10 per advance), which is better for small amounts but worse for large ones.
Interest starts accruing on day one. Unlike purchases, which have a grace period (usually 21 to 25 days before interest kicks in), cash advances charge interest from the moment you withdraw. The interest rate is typically 2 to 5 percentage points higher than your purchase APR. If your purchase rate is 18 percent, your cash advance rate might be 23 percent.
The total cost depends on how long you carry the balance. A $500 advance with a 4 percent fee ($20) and 23 percent APR costs you $20 upfront plus roughly $9.58 in interest if you pay it back in one month. If you carry it for six months, the interest alone reaches nearly $60.
When a cash advance makes sense (and when it does not)
A cash advance makes sense only in narrow situations. If you need cash for an emergency and have no other source — no savings, no access to a personal loan, no credit union membership — and you can pay it back within a month or two, the total cost may be acceptable. For example, if your car breaks down and you need $300 for a repair, a cash advance might cost $30 to $40 total, which is less than a tow truck or rental car.
A cash advance does not make sense if you are carrying a balance on your card already. The new cash advance will be charged at a higher rate than your existing purchases, and your payments will be applied to the lowest-rate debt first, meaning the cash advance sits and accrues interest while you pay down cheaper debt. It also does not make sense if you cannot pay it back quickly — the interest compounds fast.
Do not use a cash advance to fund spending you cannot afford or to move debt around. That is a sign you need a budget or debt counseling, not more borrowing.
Cheaper alternatives to a credit card cash advance
A personal loan from a bank or online lender usually costs less. Interest rates range from 6 to 36 percent depending on your credit score, which is often lower than a cash advance rate. There is no upfront fee on most personal loans. The tradeoff is that approval takes a few days, not minutes.
A credit union loan is often the cheapest option if you are a member. Credit unions typically charge lower rates and smaller fees than banks or credit card companies. If you are not a member, you may be able to join one based on where you work, where you live, or a group you belong to. Some credit unions offer emergency loans that fund within 24 hours.
A payday loan alternative through a nonprofit credit counselor or community bank is designed to replace predatory payday loans but may also beat a cash advance. These loans are smaller (usually $300 to $1,000), have lower fees, and charge interest rates capped at 18 to 36 percent. The National Foundation for Credit Counseling can refer you to a program near you.
If you have a 401(k), you may be able to borrow against it, though this carries its own risks. If you have a friend or family member willing to lend, that is free — but only if you treat it like a real loan with a written repayment plan.
How to pay back a cash advance quickly
Pay the cash advance balance before you make any other credit card payments. Credit card companies explore your payment to the lowest-interest debt first, which means if you have purchases at 18 percent and a cash advance at 23 percent, your payment goes to the purchases first. To avoid this, call your card issuer and ask if you can designate your payment to the cash advance specifically. Some issuers allow it; others do not.
If your issuer will not let you direct your payment, make the minimum payment on the whole card, then send an additional payment labeled "cash advance only" or call and ask them to explore it that way. Keep records of what you send and where it goes.
Set up automatic payments if possible. Even a small automatic payment every week or two keeps the balance from growing and reduces the total interest you pay. A $500 advance paid off in four automatic $125 payments costs far less than one lump sum after three months.
How a cash advance affects your credit score
A cash advance does not hurt your credit score in the moment of withdrawal. However, it does increase your credit utilization — the percentage of your available credit you are using. If you have a $5,000 credit limit and a $1,500 cash advance limit, and you withdraw $500, your utilization jumps from 0 to 33 percent of your cash advance limit. High utilization can lower your score by a few points.
The bigger hit comes if you carry the balance and miss payments. Late payments stay on your credit report for seven years and damage your score significantly. A cash advance that becomes a long-term balance is a red flag to future lenders.
If you pay the cash advance off within a month or two, the credit score impact is minimal. The utilization drops back down, and there is no late payment to report.
Frequently Asked Questions
Can I use a credit card cash advance to pay off another debt?
Technically yes, but it is usually a bad idea. You are replacing one debt with a more expensive one — the cash advance rate is higher, and you pay an upfront fee. The only exception is if you are moving money from a much higher-rate source (like a payday loan at 400 percent APR) to a lower-rate source temporarily while you find a better option.
What happens if I do not pay back the cash advance?
The balance stays on your credit card and accrues interest. After 30 days, it is reported as late to the credit bureaus and damages your score. After 180 days, the card issuer may close your account and send the debt to a collection agency. You will owe the original amount plus all accrued interest, fees, and collection costs.
Is there a limit to how much I can withdraw as a cash advance?
Yes. Your card issuer sets a cash advance limit, which is usually 20 to 50 percent of your credit limit. ATMs also have daily withdrawal limits, often $500 to $1,000. You can exceed the ATM limit by going to a bank teller, but you cannot exceed your card's cash advance limit.
Do I have to pay the cash advance fee?
Yes. The fee is built into the cash advance product and cannot be waived. Some cards charge a percentage; others charge a flat fee. You can only avoid it by not taking the advance.
Can I get a cash advance on a debit card?
No. Debit cards draw from money you already have in your account. A cash advance is a loan product, which only credit cards offer. If you need cash and have a debit card, you can withdraw from an ATM for free (up to your account balance).