What a cash advance is and why it costs more than a purchase
A cash advance is when you borrow money directly from your credit card's line of credit and receive it as cash. It is not the same as using your card to buy something. The card issuer treats it as a short-term loan, and charges you fees and interest rates that are almost always higher than what you pay on regular purchases.
Most credit cards charge a cash advance fee — typically 3% to 5% of the amount you withdraw, with a minimum fee of $5 to $10. On top of that, the interest rate on cash advances is usually 2% to 3% higher than your regular purchase APR, and interest starts accruing when ready. There is no grace period like there often is for purchases. If you withdraw $500, you might pay $15 to $25 just to get the cash, then interest begins the same day.
Because of these costs, a cash advance should be a last resort, not a convenient way to get spending money. It makes sense only when you have no other option and need cash urgently.
Key Takeaways
- Cash advances charge a fee (usually 3% to 5%) 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 sends you.
- Your credit card's cash advance limit is often lower than your total credit limit, and you can find it in your cardholder agreement or by calling the issuer.
- If you need cash, a personal loan, payday loan alternative, or borrowing from family usually costs less than a credit card cash advance.
Three ways to withdraw cash using your credit card
The most common method is using an ATM. Insert your credit card, enter your PIN (which you may need to set up if you have not used cash advances before), and withdraw the amount you need. The ATM will show you the fee before you confirm the transaction. You can use any ATM, though your card issuer's own ATMs usually charge lower fees than out-of-network machines.
The second method is visiting a bank teller at your card issuer's branch or any bank that accepts your card type. Tell the teller you want a cash advance, show your card and ID, and they will process it. This method works if you do not have a PIN set up or if the ATM is not working. The fee structure is the same as an ATM.
The third method is using a convenience check. Some card issuers mail these checks to cardholders, and you can write one to yourself or to someone else. When you cash or deposit it, the amount is treated as a cash advance. If you receive these checks in the mail, your cardholder agreement will explain the fee and terms. Do not use them unless you understand the cost — they are straightforward to overlook as regular checks.
Finding your cash advance limit and how it differs from your credit limit
Your cash advance limit is separate from your total credit limit. You might have a $5,000 credit limit but only a $1,500 cash advance limit. This means you can spend $5,000 on purchases, but withdraw only $1,500 as cash. Card issuers set these limits lower because cash advances are riskier for them — there is no merchant involved to dispute the transaction, and you have the cash when ready.
To find your cash advance limit, check your cardholder agreement (usually available online in your account or by mail), call the customer service number on the back of your card, or log into your online account. The limit may be listed as "cash advance limit" or "ATM withdrawal limit." If you have not used a cash advance before, your limit might be $0 until you call and request one.
You can ask your card issuer to lower your cash advance limit if you want to reduce the temptation to use it, or to raise it if you have a genuine need. Raising it does not cost anything, but it does not change the fees or interest rate you will pay.
How fees and interest add up on a cash advance
Suppose you withdraw $300 as a cash advance. Your card charges a 4% fee and a 24% APR. Here is what happens:
| Item | Amount |
|---|---|
| Cash withdrawn | $300.00 |
| Cash advance fee (4%) | $12.00 |
| Total owed when ready | $312.00 |
| Interest for 30 days at 24% APR | $6.24 |
| Total cost after one month | $18.24 |
If you pay back the $312 within 30 days, your total cost is $18.24. If you carry the balance for three months, interest compounds and your total cost rises to roughly $37. The longer you carry the balance, the more you pay. This is why paying back a cash advance as quickly as possible is critical.
Cheaper alternatives to a credit card cash advance
A personal loan from a bank or credit union usually has a lower interest rate than a cash advance, especially if you have decent credit. You borrow a fixed amount, receive it as a lump sum, and repay it in equal monthly payments. The interest rate is typically 6% to 36% depending on your credit score, which is lower than the 24% to 30% you often see on cash advances. The downside is that a personal loan takes a few days to a week to fund, so it does not work if you need cash today.
A payday loan alternative through a credit union or nonprofit lender may be available if you need cash within hours. These are short-term loans designed to bridge a gap until your next paycheck, and they charge less than payday loans from storefronts. Credit unions often offer loans of $500 to $1,000 at rates capped at 28% APR. You will need to be a member, but membership is usually open to anyone in your area.
Borrowing from family or friends costs nothing if they do not charge interest, though it can strain relationships if repayment is unclear. If you do borrow this way, put the terms in writing — the amount, the repayment date, and whether interest applies. This protects both of you.
If you have a savings account with money in it, use that instead. There is no fee, no interest, and no debt. This is always the cheapest option if it is available to you.
When a cash advance makes sense and when it does not
A cash advance makes sense only in narrow situations: you need cash urgently, you have no other source of funds, and the amount is small enough that you can pay it back within a few weeks. An example might be your car breaks down, the mechanic takes only cash, and you need it today. You withdraw $400, pay the $16 fee, and repay it within two weeks. Your total cost is roughly $18 to $20.
A cash advance does not make sense if you are using it for everyday spending, to pay bills you could pay another way, or because you have run out of money in your checking account. It also does not make sense if you cannot pay it back within a month. If you are considering a cash advance because you are short on money regularly, that is a sign to look at your budget or explore other help — not to borrow at high rates.
Be especially cautious if you are already carrying a balance on your credit card. A cash advance adds to that debt and charges a higher interest rate, making it harder to dig out.
How to set up a PIN and what to do if you forget it
To use an ATM for a cash advance, you need a PIN (personal identification number). If you have never used a cash advance before, you may not have one set up. You can create a PIN by calling your card issuer's customer service number (on the back of your card) and asking them to set one up. They will ask you security questions to verify your identity, then assign you a temporary PIN. You can usually change it to something you choose.
Some card issuers let you set up a PIN online through your account. Log in, look for "cash advance" or "ATM" settings, and follow the prompts. This is faster than calling.
If you forget your PIN, call customer service and they will reset it. You will need to verify your identity. The process usually takes a few minutes, and you can use a new PIN at the ATM right away.
Frequently Asked Questions
Does using a cash advance hurt my credit score?
A cash advance itself does not directly hurt your score, but it increases your credit utilization — the percentage of your available credit you are using. If you have a $5,000 limit and withdraw $1,500 as a cash advance, your utilization jumps to 30%. High utilization can lower your score slightly. The bigger risk is if you carry the balance and miss payments, which will damage your score.
Can I use a cash advance to pay off another credit card?
Technically yes, but it is almost never a good idea. You are borrowing at a high rate (the cash advance rate) to pay off debt at a lower rate (your other card's purchase rate). You also pay the cash advance fee on top. A balance transfer or personal loan would be much cheaper.
What happens if I withdraw more than my cash advance limit?
The ATM or teller will decline the transaction. You cannot exceed your limit. If you need more cash than your limit allows, you would have to make multiple withdrawals on different days, or contact your card issuer to request a higher limit.
Is there a difference between a cash advance and a balance transfer?
Yes. A cash advance gives you cash and charges a fee plus a high interest rate. A balance transfer moves debt from one card to another, usually with a lower introductory rate for a set period. Balance transfers are for paying off other debts; cash advances are for getting cash. They have different fees and rates.
Can I get a cash advance if I have bad credit?
If your card issuer approved you for a credit card, they have already approved you for cash advances up to your limit. Bad credit does not prevent you from using a cash advance — you can withdraw up to your limit whenever you want. The downside is that your interest rate and fees are the same regardless of your credit score, and they are already high.