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 card's credit line instead of your debit account. You go to an ATM, a bank teller, or sometimes a convenience store, and pull out money the same way you would with a debit card — except the money comes from your credit card company, not your checking account. You owe that money back to the card issuer, just like a purchase, but the terms are much worse.
The key difference from a regular purchase: a cash advance starts charging interest when ready. There is no grace period. Interest begins accruing the day you withdraw the cash, even if you pay it back in full the next week. On top of that, most card issuers charge an upfront fee — usually 3 to 5 percent of the amount you withdraw — just for taking the cash out.
Cash advances are tempting when you need money fast and your checking account is empty. But they are one of the most expensive ways to borrow on a credit card, and they can damage your credit score if the balance gets large.
Key Takeaways
- Cash advances charge interest from day one with no grace period, unlike credit card purchases which often have 21 to 25 days interest-free.
- Most card issuers charge an upfront fee of 3 to 5 percent of the cash amount, on top of the interest you will owe.
- The interest rate on a cash advance is usually higher than the rate on regular purchases — sometimes 5 to 10 percentage points higher.
- Cash advances count toward your credit utilization ratio, which can lower your credit score if the balance is large relative to your credit limit.
- Paying off a cash advance takes longer because your card issuer applies payments to purchases first, then to cash advances.
How the fees and interest work
When you withdraw $500 as a cash advance, you pay two separate costs. First, there is the upfront fee — if your card charges 4 percent, you owe $20 just to take the money out. That fee is added to your balance when ready. Second, interest starts accruing on the full $520 (the $500 plus the $20 fee) the same day you withdraw it.
The interest rate on a cash advance is not the same as your regular purchase APR. Card issuers set a separate, higher rate for cash advances. If your purchase APR is 18 percent, your cash advance APR might be 25 or 28 percent. That higher rate applies from day one, with no grace period. A $500 cash advance at 25 percent APR costs you about $3.42 per day in interest alone.
If you carry the cash advance for a month, you will owe roughly $100 in interest plus the $20 upfront fee — a total of $120 on top of the $500 you borrowed. That is a 24 percent cost for one month of borrowing, which is why cash advances should only be used for genuine emergencies.
Where you can take out a cash advance
You can withdraw a cash advance at most ATMs that display your card's logo — Visa, Mastercard, American Express, or Discover. You insert your card, enter your PIN, and select the cash advance option. The ATM will show you the fee before you confirm, so you know the exact cost upfront.
You can also visit a bank teller and ask for a cash advance. Some banks charge a lower fee if you go in person rather than use an ATM, though this varies by issuer. A few convenience stores and check-cashing services offer cash advances, but they often charge additional fees on top of what your card issuer charges, so avoid them.
Your card issuer sets a limit on how much you can withdraw as a cash advance. This limit is separate from your credit limit and is usually much lower — often $500 to $1,000, depending on your credit history and the card. You can find your cash advance limit in your card's terms and conditions or by calling the number on the back of your card.
How cash advances affect your credit score
A cash advance does not hurt your credit score just by existing. But it can hurt your score if the balance is large, because credit scoring models look at your credit utilization ratio — the percentage of your available credit that you are currently using. If you have a $5,000 credit limit and a $2,000 cash advance balance, your utilization is 40 percent. Most scoring models penalize utilization above 30 percent.
The damage is temporary. Once you pay off the cash advance, your utilization drops and your score recovers. But while the balance is sitting there, it is working against you. If you are planning to explore for a loan or mortgage in the next few months, a large cash advance balance can lower your score enough to affect your interest rate or approval odds.
A cash advance also does not build credit the way a regular purchase does. Both show up on your credit report, but neither one helps or hurts your payment history unless you miss a payment. The real risk is the utilization hit while the balance is outstanding.
Why paying off a cash advance takes longer
When you make a payment on your credit card, the card issuer applies it in a specific order set by law: first to any balance transfer, then to purchases, then to cash advances. This means if you have both a purchase balance and a cash advance balance, your payment goes to the purchase first, even though the cash advance is charging you a higher interest rate.
This matters because it means you are paying interest on the cash advance longer than you might expect. Say you have a $1,000 purchase balance at 18 percent APR and a $500 cash advance at 25 percent APR. You send in a $500 payment. The entire $500 goes to the purchase, and the cash advance balance stays at $500, still accruing interest at the higher rate. You are essentially paying interest on the cash advance while your payment is being applied to the cheaper debt.
To pay off a cash advance faster, you need to pay more than the minimum and specifically request that the extra payment go to the cash advance. Some card issuers let you do this online or by phone. If you cannot direct the payment, you may need to pay off the purchase balance completely first, then focus on the cash advance.
Alternatives to a cash advance
If you need cash in an emergency, a cash advance should be your last choice, not your first. A personal loan from a bank or credit union usually charges less interest and gives you a fixed repayment schedule. A payday loan is faster but often more expensive than a cash advance, so that is not a better option. A 0 percent balance transfer card can move existing debt to a new card with no interest for 6 to 21 months, but it does not give you cash.
If you have a friend or family member who can lend you money, that is almost always cheaper than a cash advance. If you have a 401(k) or similar retirement account, you may be able to borrow against it at a low rate, though this has tax consequences if you do not repay it on time. Some employers offer paycheck advances or emergency loans to employees.
If you absolutely must use a cash advance, keep the amount as small as possible and pay it back within days, not weeks. Every day the balance sits there, the interest compounds. A $300 cash advance paid back in three days costs far less than a $500 advance paid back in a month.
Frequently Asked Questions
Can I use a credit card cash advance to pay another credit card?
Yes, but it is almost never worth it. You pay the cash advance fee upfront, then the interest starts when ready. You are essentially converting one debt into a more expensive debt. The only scenario where this makes sense is if you are moving a high-interest balance to a 0 percent card and using the cash advance as a temporary bridge, but even then, a balance transfer is cheaper.
What happens if I cannot pay back a cash advance?
The balance stays on your credit card and continues to accrue interest. If you miss a payment, it gets reported to the credit bureaus and damages your credit score. The card issuer can also raise your interest rate or close your account. If the debt goes unpaid long enough, the card company may sell it to a debt collector.
Is there a difference between a cash advance and a balance transfer?
Yes. A balance transfer moves debt from one card to another, usually with a lower interest rate for a set period. A cash advance withdraws cash from your card's credit line. Balance transfers are for moving existing debt; cash advances are for getting cash. Balance transfers usually have a lower upfront fee and a lower interest rate during the promotional period.
Can I take a cash advance from a store credit card?
Most store credit cards do not allow cash advances at all. They are designed for purchases only. Bank-issued credit cards (Visa, Mastercard, American Express, Discover) allow cash advances, but store cards typically do not. Check your card's terms or call the issuer to confirm.
Does a cash advance show up on my credit report?
The balance shows up on your credit report as part of your overall credit card balance. It does not show separately as a "cash advance" — it is just part of what you owe. But the interest rate and fees are tracked by your card issuer, and the balance affects your credit utilization ratio.