What a cash advance is and why it costs more than a purchase
A cash advance is borrowing money directly from your credit card issuer, not from a merchant. You get the cash in hand, but the card treats it differently than a purchase: it charges a separate fee (usually 3 to 5 percent of the amount), starts charging interest when ready with no grace period, and often charges a higher interest rate than your regular purchase APR.
If you take a $500 cash advance at a 5 percent fee and 25 percent APR, you pay $25 upfront and then interest on $525 starting the day you withdraw it. A $500 purchase on the same card would have no fee and no interest if you paid the full balance by the due date. That difference matters, and it is why cash advances are a last resort, not a convenience.
Key Takeaways
- Cash advances charge an upfront fee (typically 3 to 5 percent) plus a higher interest rate than purchases, with interest starting when ready.
- You can get a cash advance at an ATM using your PIN, at a bank teller window, or through a convenience check your card issuer mails you.
- Most cards have a cash advance limit that is lower than your credit limit, and you can find yours by calling the number on the back of your card.
- A personal loan, payday loan alternative, or credit card balance transfer often costs less than a cash advance if you need money quickly.
The three ways to take cash from your credit card
ATM withdrawal is the fastest method. Insert your card at any ATM that displays your card brand's logo, enter your PIN, select "cash advance" or "withdrawal," and choose the amount. The ATM dispenses cash and your card issuer records the transaction when ready. You can do this 24 hours a day, but you will see the fee and interest charges on your next statement.
Bank teller withdrawal works if you have a credit card issued by a bank where you also have a checking account, or sometimes at any branch of that bank. Walk in with your card and ID, tell the teller you want a cash advance, and they will process it on the spot. This method is slower than an ATM but lets you withdraw larger amounts and ask questions about your limit and fees.
Convenience checks are blank checks your card issuer mails to you periodically. You write one like a regular check, deposit it in your bank account, and the amount becomes a cash advance on your credit card. These are useful if you need to pay a bill by check, but they carry the same fees and interest as an ATM withdrawal. Do not confuse them with balance transfer checks, which move debt between cards and have different terms.
How much you can withdraw and what it costs
Your card issuer sets a cash advance limit that is usually lower than your total credit limit — often 20 to 50 percent of it. If your credit limit is $5,000, your cash advance limit might be $1,000 or $2,500. You can find your exact limit by calling the customer service number on the back of your card and asking, or by logging into your online account.
The cost of a cash advance has two parts. The cash advance fee is a percentage of the amount you withdraw, typically 3 to 5 percent, charged once at the time of withdrawal. The interest rate is usually 2 to 5 percentage points higher than your purchase APR and starts accruing the day you withdraw the cash — there is no grace period like there is for purchases. If your purchase APR is 18 percent and your cash advance APR is 23 percent, a $500 advance costs $25 in fees plus interest that grows daily until you pay it back.
Use an online calculator or ask your card issuer for an estimate before you withdraw. A $500 advance at a 5 percent fee and 23 percent APR costs $25 upfront; if you pay it back in 30 days, you will owe roughly $29 in interest, for a total cost of about $54. That same $500 borrowed from a credit union or personal loan lender might cost $15 to $30 total.
When a cash advance makes sense and when it does not
A cash advance makes sense only when you need cash when ready and have no other option. Examples: your car breaks down and the mechanic takes cash only, you are traveling and your debit card is lost, or you need to pay a bill that does not accept credit cards and you have no other funds. In these cases, the cost is worth the speed and certainty of getting the money.
A cash advance does not make sense for everyday expenses, building an emergency fund, or paying down other debt. If you are considering a cash advance to cover rent, groceries, or credit card bills, that signals a deeper cash flow problem that a cash advance will make worse, not better. You will owe the advance back plus fees and interest, on top of whatever you already owe.
Cheaper alternatives to a cash advance
A personal loan from a bank, credit union, or online lender usually costs less than a cash advance. Interest rates range from 6 to 36 percent depending on your credit score and the lender, and there is no upfront fee. A $500 personal loan at 15 percent APR costs roughly $40 in interest over 12 months — less than half the cost of a cash advance. The tradeoff is that approval takes a few days to a week, so this works only if you can wait.
A payday loan alternative through a credit union (sometimes called a PAL, or Payday Alternative Loan) caps the fee at $20 and the interest rate at 28 percent APR. You must be a member of the credit union, but membership is often open to anyone in your area. This costs less than a cash advance and less than a traditional payday loan.
A balance transfer to a new card with a 0 percent introductory APR can work if you have time to explore and be approved (usually 5 to 10 business days). You transfer the amount you need from your current card to the new card, pay no interest for 6 to 21 months, and then pay back the balance. There is usually a 3 to 5 percent transfer fee, but if you pay the balance before the intro period ends, your total cost is just that fee — often cheaper than a cash advance plus interest.
How to repay a cash advance and minimize interest
Pay back a cash advance as fast as you can. Unlike a purchase, which you can pay off gradually, a cash advance accrues interest every single day from the moment you withdraw it. If you took a $500 advance at 23 percent APR, waiting 60 days to pay it back costs you roughly $19 in interest alone. Paying it back in 10 days costs about $3.
When you make a payment to your credit card, the card issuer applies it to your lowest-interest debt first — usually purchases — and your highest-interest debt last — usually cash advances. This means if you have both a purchase balance and a cash advance balance, your payment goes toward the purchase first, and the cash advance keeps accruing interest. To minimize this, pay the cash advance balance in full before you make any other charges on the card, or call your issuer and ask if you can direct a payment specifically to the cash advance.
Frequently Asked Questions
Does taking a cash advance hurt my credit score?
A cash advance itself does not hurt your score, but it does increase your credit utilization (the percentage of your available credit you are using), which can lower your score slightly. If you pay it back quickly, the impact is temporary. However, if the cash advance pushes you close to your credit limit, the damage is larger and lasts longer.
Can I take a cash advance if I have bad credit?
Yes, if you already have a credit card, you can take a cash advance up to your limit regardless of your current credit score. The card issuer already approved you when you opened the account. However, if you do not have a credit card yet, getting one with bad credit is harder and more expensive.
What happens if I cannot pay back the cash advance?
The balance stays on your card, interest keeps accruing, and your minimum payment increases. If you miss payments, your card issuer will report it to the credit bureaus, your score will drop, and the issuer may freeze your account or send the debt to a collection agency. Contact your card issuer when ready if you cannot pay — some offer hardship programs that lower your interest rate temporarily.
Is a cash advance the same as a balance transfer?
No. A balance transfer moves debt from one card to another and usually has a lower fee and interest rate. A cash advance gives you physical cash and charges a higher fee and interest rate. Balance transfers are for paying off existing debt; cash advances are for getting spending money.
Can I use a cash advance to pay another credit card bill?
Technically yes, but it is a bad idea. You are borrowing at a high rate (cash advance APR) to pay off debt at a lower rate (purchase APR), and you are paying a fee on top. You end up owing more, not less. A balance transfer or personal loan is cheaper.