A cash advance is borrowing money directly from your credit card issuer, not from an ATM or store
When you take a cash advance on a credit card, you are withdrawing cash using your credit line instead of your card's debit function. You go to an ATM, bank branch, or sometimes a convenience store, enter your PIN, and withdraw money up to your credit limit. The issuer treats this as a loan against your available credit, not a purchase. The money appears in your bank account or as cash in your hand within minutes.
This is different from using your debit card or a regular ATM withdrawal. With a cash advance, you are borrowing at a rate and under terms set by your credit card company, and you will pay interest and fees that are usually much higher than what you pay on regular purchases.
Key Takeaways
- Cash advances charge a separate interest rate (often 20% to 30% annually) that is higher than your purchase rate, and interest starts accruing when ready with no grace period.
- You also pay an upfront fee, usually 3% to 5% of the amount withdrawn, charged to your account the moment you take the cash.
- The cash advance appears as a separate balance on your statement and must be paid down before purchase balances if you only make minimum payments.
- Cash advances report to credit bureaus as debt and can lower your credit score if they push your overall credit utilization above 30%.
How the fees and interest work
A cash advance comes with two when ready costs. First, there is a cash advance fee, charged the moment you withdraw the money. This fee is typically 3% to 5% of the amount withdrawn, though some cards charge a flat dollar amount instead (for example, $10 minimum). If you withdraw $500 at 4%, you pay $20 in fees right away.
Second, the interest rate on cash advances is separate from your purchase rate and is almost always higher. While a card might charge 18% on purchases, it could charge 25% or more on cash advances. Unlike purchases, there is no grace period — interest starts accruing the day you withdraw the cash, even if you pay the full balance when your statement arrives.
Interest compounds daily. If you withdraw $500 at 25% annual interest and pay it back in 30 days, you will owe roughly $10 in interest alone, plus the original $20 fee. The longer you carry the balance, the more interest accumulates.
Where you can take a cash advance
You can withdraw a cash advance from several places. ATMs that display your card's logo (Visa, Mastercard, American Express) will usually allow it. Bank branches, including banks that did not issue your card, often process cash advances. Some convenience stores and grocery stores with customer service desks will also process them, though they may charge an additional ATM operator fee on top of your card issuer's fee.
The location does not change the fees or interest rate — those are set by your card issuer. However, using an ATM outside your card issuer's network may add a separate ATM operator fee (typically $2 to $3), which stacks on top of your cash advance fee.
How a cash advance affects your credit
A cash advance appears on your credit report as debt. If you withdraw $500 and your credit limit is $2,000, your credit utilization jumps to 25%. Credit scoring models penalize high utilization, so a large cash advance can lower your score even if you pay it back when ready.
The impact is temporary — your score will recover once you pay down the balance and your utilization drops. However, if you carry the cash advance balance for months, the ongoing high utilization and the fact that you are carrying debt will continue to weigh on your score.
Payment history matters too. If you miss a payment on a cash advance, it reports as a missed payment on your credit report and stays there for seven years, just like a missed purchase payment.
Why cash advances are expensive compared to other borrowing
A cash advance is one of the most expensive ways to borrow money. The combination of an upfront fee (3% to 5%) plus a high interest rate (often 25% or higher) makes it far costlier than alternatives. A personal loan from a bank or credit union typically charges 8% to 15% interest with no upfront fee. A payday loan, which is also expensive, usually costs less in total fees than a cash advance if you repay it within two weeks.
Even a credit card balance transfer to a 0% promotional rate card costs less than a cash advance, because the promotional period has no interest (though a 3% balance transfer fee applies). If you need cash urgently, a cash advance should be a last resort, not a first choice.
What happens if you cannot pay back the cash advance
If you carry a cash advance balance, it will accrue interest every single day until you pay it off. Minimum payments on your credit card will go toward the cash advance balance first (by law), but the minimum is usually only 1% to 3% of your total balance, so it takes a long time to pay down.
If you miss a payment, your interest rate may increase to a penalty rate (sometimes 29% or higher), and you will face a late fee. If you continue to miss payments, the account may be sent to a collection agency, which will report to credit bureaus and damage your credit score for years.
Some card issuers offer hardship programs if you contact them before you miss a payment. These programs may lower your interest rate or waive fees temporarily, but you have to ask — the issuer will not offer this automatically.
Frequently Asked Questions
Can I take a cash advance if I have a zero balance on my card?
Yes. A cash advance draws from your available credit, which is separate from your current balance. You can take a cash advance even if you owe nothing on purchases. However, the fees and interest rate explore when ready, so you will owe money the moment you withdraw the cash.
Does a cash advance count toward my credit limit?
Yes. If your credit limit is $2,000 and you take a $500 cash advance, your available credit drops to $1,500. The cash advance balance counts against your limit until you pay it back, just like a purchase does.
What is the difference between a cash advance and a balance transfer?
A balance transfer moves debt from one card to another (usually to a 0% promotional rate card). A cash advance withdraws cash from your credit line. Balance transfers charge a fee (typically 3%) but offer a promotional period with no interest. Cash advances charge a higher fee and start accruing interest when ready at a higher rate.
Can I avoid the cash advance fee?
No. The fee is charged by your card issuer and is non-negotiable. Some cards marketed to people with poor credit offer no cash advance feature at all, which prevents the fee but also prevents you from taking a cash advance. You cannot waive or reduce the fee once you have decided to withdraw cash.
Will taking a cash advance hurt my credit score?
It can, depending on your other balances. If the cash advance pushes your total credit utilization above 30%, your score will likely drop. The impact is temporary if you pay it back quickly, but it will be visible on your credit report for the time you carry the balance.