A cash advance is borrowing money directly from your credit card issuer, not from an ATM or bank
When you take a cash advance on a credit card, you are withdrawing cash using your credit line instead of your debit account. You go to an ATM, bank teller, or convenience store and use your credit card to pull out dollars. The card issuer lends you that money at that moment, and you owe it back with interest and fees — separate from any balance you already carry on the card.
This is different from using a debit card at an ATM, where you are spending money you already have. With a cash advance, you are taking on new debt when ready. The issuer treats it as a loan, not a purchase, which means the terms are worse: higher interest rates, upfront fees, and no grace period.
Most people use cash advances when they need physical money urgently and do not have cash on hand. But the cost of that convenience is steep, and understanding how it works before you do it can save you hundreds of dollars.
Key Takeaways
- Cash advances charge a fee (usually 3 to 5 percent of the amount withdrawn) plus a higher interest rate than regular purchases, often 20 to 30 percent annually.
- Interest on a cash advance starts accruing when ready — there is no grace period like there is for credit card purchases.
- The cash advance limit on your card is often lower than your overall credit limit, so you may not be able to withdraw as much as you can spend.
- Payments you make go toward your lowest-interest debt first, so cash advance balances can take longer to pay off even if you are paying down your card.
How the fees and interest work
A cash advance charges two separate costs on top of the amount you withdraw. The first is an upfront cash advance fee, which is a percentage of the amount you take out. Most card issuers charge between 3 and 5 percent, though some charge a flat dollar amount instead (like $10 minimum). If you withdraw $500, a 4 percent fee costs you $20 when ready.
The second cost is interest, which accrues daily from the moment you withdraw the cash. Unlike a purchase, which has a grace period (usually 21 to 25 days before interest kicks in), a cash advance starts charging interest the same day. The interest rate on cash advances is typically higher than your purchase rate — often 5 to 10 percentage points higher. If your purchase APR is 18 percent, your cash advance APR might be 28 percent.
These costs compound quickly. A $500 cash advance at a 4 percent fee ($20) plus 25 percent annual interest costs you roughly $3.13 per week in interest alone. If you carry that balance for three months, you pay about $40 in interest on top of the $20 fee — $60 total on a $500 withdrawal.
Where you can take out a cash advance
You can withdraw a cash advance at several types of locations. ATMs that accept your card brand (Visa, Mastercard, American Express, Discover) will let you pull cash using your credit card, though some ATMs charge an additional operator fee on top of your card issuer's fee. Bank tellers at your card issuer's bank or other banks will also process cash advances, and some will waive the operator fee if you have an account there.
Convenience stores, casinos, and some retail locations offer cash advances at the register, though these typically charge higher operator fees than ATMs. Payday loan shops and check-cashing services also offer credit card cash advances, but their fees are often the highest of all.
Your card issuer sets a separate cash advance limit, which is often much lower than your overall credit limit. You might have a $5,000 credit limit but only a $1,000 cash advance limit. Check your card's terms or call the issuer to find out your limit before you try to withdraw.
Why your payment goes to other balances first
If you carry multiple balances on your credit card — a purchase balance, a balance transfer balance, and a cash advance balance — your payment is applied to the lowest-interest debt first. This means your cash advance, which has the highest interest rate, sits and accrues interest while you pay down cheaper balances.
For example, if you have a $1,000 purchase at 18 percent APR and a $500 cash advance at 28 percent APR, and you pay $200 toward your card, that $200 goes to the purchase first. Your cash advance keeps accruing interest at the higher rate. This is called the lowest-balance-first rule, and it is written into most card agreements. You can sometimes request that payments go to the highest-interest balance instead, but you have to ask your issuer explicitly.
When a cash advance makes sense
A cash advance is expensive, so it only makes sense in specific situations. If you need cash for an emergency and have no other way to get it — no savings, no access to a personal loan, no friends or family to borrow from — a cash advance is better than missing a bill payment or going without necessary money.
It also makes sense if you can pay it back within days or a week. The fee is fixed, but the interest is daily, so the faster you repay, the less interest you pay. A $500 advance paid back in five days costs roughly $5 in interest; paid back in a month, it costs roughly $35.
A cash advance does not make sense if you are using it to fund regular spending, to pay other debts, or to invest. The cost is too high for routine use, and you will end up paying more in fees and interest than you save or earn elsewhere.
Alternatives that cost less
Before you take a cash advance, consider other ways to get cash or pay what you owe. A personal loan from a bank or credit union typically charges 6 to 15 percent interest with no upfront fee, making it cheaper than a cash advance even if you carry the balance for months. A balance transfer to a 0 percent introductory APR card (if you may have access to) lets you move debt interest-free for 6 to 21 months, though there is usually a 3 to 5 percent transfer fee.
If you need physical cash, ask your employer about an advance on your paycheck, borrow from a friend or family member, or sell something you own. If you need to pay a bill, many billers let you pay by phone or online using your debit account or bank account directly, so you do not need cash at all.
If you find yourself needing cash advances regularly, that is a sign your income and expenses are out of balance. Building an emergency fund of $500 to $1,000 takes time, but it costs nothing and prevents the need for expensive borrowing when something unexpected happens.
How cash advances affect your credit score
A cash advance does not hurt your credit score directly — the act of taking one does not show up on your credit report as a negative mark. However, it increases your credit utilization, which is the percentage of your available credit you are using. If you have a $5,000 limit and take a $1,000 cash advance, your utilization jumps to 20 percent. High utilization (above 30 percent) can lower your score by a few points.
The bigger risk is if you cannot pay the cash advance back on time. Missed or late payments on any credit card balance, including a cash advance, are reported to the credit bureaus and can drop your score by 100 points or more. A cash advance that turns into long-term debt is more damaging to your score than the advance itself.
Frequently Asked Questions
Can I use a credit card cash advance to pay another credit card?
Yes, you can withdraw cash and use it to pay another card, but it is expensive. You pay the cash advance fee and interest on the withdrawal, plus you are not paying down the original card's balance. A balance transfer (moving debt directly from one card to another) is cheaper because it avoids the cash advance fee, though it usually has a smaller transfer fee instead.
Does a cash advance show up differently on my credit report than a regular purchase?
No, both show as balances on your credit report. However, your card issuer tracks them separately internally, which is why the interest rate and payment order are different. Your credit report does not distinguish between the two.
What happens if I cannot pay back a cash advance?
The balance stays on your card and accrues interest daily. If you miss the minimum payment, the issuer reports it to the credit bureaus, and your score drops. The issuer may also increase your interest rate on all balances and charge you a late fee. The debt does not go away and can be sold to a collection agency if it goes unpaid for several months.
Is there a way to avoid the cash advance fee?
No. The fee is charged by your card issuer and is non-negotiable. Some cards advertise no cash advance fee, but these are rare and usually come with higher interest rates or annual fees elsewhere. Read your card's terms to see if yours is one of them.
Can I take a cash advance from a credit card I do not use?
Yes, as long as the card is open and has available credit. You do not have to use a card for purchases to take a cash advance on it. However, the same fees and interest rates explore, so it is just as expensive as using any other card.