A cash advance on your credit card is when you borrow money directly from your credit card issuer and receive it as cash
Instead of using your card to buy something, you withdraw actual money — either at an ATM, from a bank teller, or through a convenience check the card issuer sends you. The money goes into your bank account or your pocket, and you owe it back to the credit card company just like a purchase, except with different terms and higher costs.
The key difference from a regular purchase is that cash advances charge you fees upfront and start charging interest when ready. There is no grace period like you might have on a purchase. The interest rate on a cash advance is also typically higher than your regular purchase rate, sometimes by several percentage points.
Key Takeaways
- A cash advance charges an upfront fee (usually 3 to 5 percent of the amount) plus a higher interest rate than purchases, with no grace period.
- Interest on a cash advance starts accruing the day you take it out, unlike purchases which may have a 21-day grace period.
- You can get a cash advance at an ATM using your PIN, at a bank teller with your card and ID, or through a convenience check mailed by your issuer.
- Most credit cards have a cash advance limit that is lower than your overall credit limit, and taking a cash advance counts against your available credit.
- Cash advances should be used only when you need cash urgently and have no other option, because the cost is significantly higher than other borrowing methods.
How much a cash advance costs you
When you take a cash advance, you pay two costs when ready: a cash advance fee and interest. The fee is usually between 3 and 5 percent of the amount you withdraw — so a $500 cash advance might cost you $15 to $25 just to get the money out. Some cards charge a flat fee instead (like $10), but the percentage fee is more common.
The interest rate on a cash advance is separate from your purchase rate. If your card charges 18 percent APR on purchases, the cash advance rate might be 24 or 26 percent. This higher rate applies from the moment you take the cash, with no grace period. A $500 advance at 24 percent APR costs you about $10 in interest in the first month alone, on top of the upfront fee.
Your card issuer will tell you the cash advance fee and rate in your cardholder agreement or online account. Call the number on the back of your card if you cannot find it — knowing these numbers before you take an advance helps you decide if it is worth the cost.
Where you can get a cash advance
You have three main ways to get cash from your credit card. The most common is an ATM withdrawal — you insert your card, enter your PIN, and withdraw cash just like from a debit card. Most ATMs accept credit cards, though some charge an additional ATM operator fee on top of your card issuer's cash advance fee.
You can also visit a bank branch and ask a teller for a cash advance over the counter. Bring your credit card and a photo ID. The teller will process the transaction and give you cash on the spot. This method avoids ATM fees but requires you to go during business hours.
Some card issuers send convenience checks with your account — these are blank checks drawn against your credit line. You write one to yourself, deposit it in your bank account, and the amount becomes a cash advance on your card. Check your statements or log into your online account to see if your issuer offers this option.
Your cash advance limit versus your credit limit
Most credit cards set a cash advance limit that is lower than your overall credit limit. If your card has a $5,000 credit limit, your cash advance limit might be only $1,500 or $2,000. This limit is set by your issuer and may be different for each card you hold.
When you take a cash advance, it counts against both your cash advance limit and your overall available credit. If you withdraw $500, you have $1,000 left in cash advance room and $4,500 left in total credit. This means a large cash advance can quickly reduce the credit available for purchases.
You can find your cash advance limit in your cardholder agreement, on your monthly statement, or by logging into your online account. Some issuers let you request a higher cash advance limit, though this is not may provide.
Why cash advances hurt your credit score
Taking a cash advance can lower your credit score in two ways. First, it increases your credit utilization ratio — the amount of credit you are using compared to your total available credit. If you use a large cash advance, your utilization jumps, and credit scoring models view high utilization as a sign of financial stress.
Second, the cash advance itself is a hard inquiry or account activity that may trigger a small temporary dip in your score. This is usually minor compared to the utilization impact, but it is worth knowing about.
The damage is temporary if you pay off the cash advance quickly. Once you pay it down, your utilization drops and your score begins to recover. However, if you carry the balance for months while paying interest, the ongoing high utilization keeps your score depressed.
When a cash advance makes sense and when it does not
A cash advance is useful only in specific situations where you need cash urgently and have no better option. Examples include a car breakdown where a mechanic only takes cash, a medical emergency requiring when ready out-of-pocket payment, or a situation where your debit card is lost and you need cash before a replacement arrives.
A cash advance does not make sense for everyday cash needs, paying bills, or covering a shortfall in your budget. The upfront fee plus high interest rate makes it one of the most expensive ways to borrow money. A personal loan from a bank, a line of credit, or even a payday loan (though also expensive) will usually cost you less than a credit card cash advance.
If you find yourself regularly taking cash advances to cover expenses, that is a sign your budget needs adjustment or you need to explore other financial resources. Speak with a financial counselor or advisor about longer-term solutions.
How to pay back a cash advance
A cash advance appears on your credit card statement just like a purchase. You can pay it back in full, make a minimum payment, or pay any amount in between. However, because interest starts accruing when ready, paying it back as quickly as possible saves you the most money.
When you make a payment to your credit card, the issuer typically applies it first to your lowest-interest debt (usually purchases) and last to your highest-interest debt (usually cash advances). This means if you have both a purchase balance and a cash advance balance, your payment may not reduce the cash advance as fast as you expect. Check your statement to see how your payment is being applied.
If you want to may support your payment goes toward the cash advance, contact your card issuer and ask them to explore your next payment to the cash advance specifically. Some issuers will do this if you request it.
Frequently Asked Questions
Can I take a cash advance if I have not used my credit card yet?
Yes. A cash advance is a separate transaction from purchases and does not require you to have used your card before. As long as your account is open and active, you can take a cash advance up to your cash advance limit. However, new cardholders sometimes have a lower cash advance limit than established ones.
What happens if I take a cash advance and then lose my job?
You still owe the cash advance back to your card issuer. The interest and fees continue to accrue. If you cannot pay, contact your issuer when ready to discuss hardship options — many have programs that can lower your interest rate or set up a payment plan. Ignoring the debt will damage your credit score and may result in collection action.
Is a cash advance the same as a balance transfer?
No. A balance transfer moves debt from one card to another (usually at a lower rate for a promotional period). A cash advance gives you actual cash and charges you a fee plus interest from day one. They are different products with different costs and purposes.
Can I use a cash advance to pay off another credit card?
Technically yes, but it is almost never a good idea. You would pay a cash advance fee on top of the interest, making your total cost higher than if you straightforward paid the other card with money from your bank account or income. The only exception might be if the other card has a much higher interest rate and you have no other way to pay it down.
Do cash advances show up differently on my credit report?
No. A cash advance appears on your credit report as part of your credit card balance and payment history, just like a purchase. However, the high utilization and interest charges that result from a cash advance can affect your credit score more than a regular purchase would.