Yes, you can get cash from your credit card, but it costs more than a regular purchase
A cash advance is when you withdraw money directly from your credit card's credit line at an ATM, bank, or through other methods. The money goes into your pocket as cash, not toward a purchase. Unlike a regular purchase, a cash advance starts charging interest when ready — there is no grace period — and the interest rate is usually higher than your card's regular purchase rate.
You can get a cash advance from most credit cards, but the cost and terms depend on your card issuer and the method you use. The three main ways are: withdrawing at an ATM using your PIN, getting cash over the counter at a bank, or using a convenience check the card issuer mails you.
Key Takeaways
- Cash advances charge interest from day one with no grace period, and the interest rate is typically 3 to 5 percentage points higher than your purchase rate.
- Most card issuers charge an upfront fee of 3 to 5 percent of the amount you withdraw, on top of the interest.
- The daily interest compounds, so a $500 cash advance can cost $50 to $100 in fees and interest within the first month depending on your card and rate.
- Cash advances do not earn rewards points and count against your credit limit, reducing what you can spend on regular purchases.
- If you need cash, a personal loan or a balance transfer to a 0% card are usually cheaper options than a cash advance.
How the fees and interest work
When you take a cash advance, you pay two costs when ready: a cash advance fee and cash advance interest. The fee is charged upfront and is usually 3 to 5 percent of the amount you withdraw. So if you take out $500, you might pay $15 to $25 just to get the cash.
The interest rate on cash advances is separate from your regular purchase rate. Most card issuers charge 2 to 3 percentage points more for cash advances than for purchases. If your purchase rate is 18 percent, your cash advance rate might be 21 or 22 percent. Unlike purchases, this interest starts accruing the day you withdraw the cash — there is no 21-day grace period.
The interest compounds daily, which means you pay interest on the interest. A $500 cash advance at a 22 percent annual rate costs about $9 in interest in the first month if you do not pay it back. That does not sound like much, but it adds up fast. If you carry the balance for six months, you could pay $30 or more in interest alone, plus the original $15 to $25 fee.
Where you can get a cash advance
The most common way is to use an ATM with your credit card and PIN. Most ATMs accept credit cards, though some charge an additional ATM operator fee on top of your card issuer's cash advance fee. That fee is usually $2 to $3 and goes to the ATM owner, not your card issuer.
You can also go to a bank branch — yours or any bank — and ask the teller for a cash advance. The teller will run your card and give you cash. This method avoids the ATM operator fee but may take longer than an ATM withdrawal.
Some card issuers mail convenience checks that work like regular checks but draw from your credit line. You write the check to yourself or to someone else, deposit it, and the money appears in your bank account. Convenience checks often have the same fees and interest rates as ATM cash advances, and some issuers charge an additional fee for using them.
Why cash advances are expensive compared to other borrowing
A cash advance is one of the most expensive ways to borrow money. To see why, compare it to other options. A personal loan from a bank or credit union typically charges 6 to 36 percent interest depending on your credit score, with no upfront fee. A payday loan charges a flat fee but is meant to be repaid in two weeks. A balance transfer to a 0% card lets you move debt interest-free for 6 to 21 months, though you pay a 3 to 5 percent transfer fee upfront.
A cash advance combines a high upfront fee with a high interest rate and no grace period. If you need $500 in cash, a personal loan at 15 percent costs you about $6 in interest per month. A cash advance at 22 percent with a 5 percent fee costs you $25 upfront plus $9 in interest the first month — nearly five times as much.
The only scenario where a cash advance makes sense is if you need cash for one or two days and can pay it back when ready. Even then, you are paying the upfront fee for the privilege. If you need cash for longer than a few days, look for a cheaper option first.
How a cash advance affects your credit and spending power
A cash advance counts against your credit limit just like a purchase does. If your card has a $5,000 limit and you take a $500 cash advance, your available credit drops to $4,500. This matters because credit card companies look at your credit utilization ratio — the percentage of your limit you are using — when calculating your credit score. The higher your utilization, the lower your score.
A cash advance also does not earn rewards points or cash back. If your card gives you 2 percent cash back on purchases, you get nothing on a cash advance. This is another reason cash advances are a poor choice for everyday spending.
When you pay back a cash advance, the payment goes toward the cash advance balance first, not your regular purchases. This matters if you carry a balance. If you have a $500 cash advance at 22 percent and a $1,000 purchase at 18 percent, and you pay $300, that $300 goes to the cash advance. You keep paying the higher rate on the cash advance until it is gone.
Cheaper alternatives to a cash advance
If you need cash, consider these options before using a cash advance. A personal loan from a bank, credit union, or online lender usually has a lower interest rate and no upfront fee. You get the money in your bank account in one to three business days and can repay it over months or years. The downside is that you have to go through an approval process, which takes time.
A balance transfer card with a 0% introductory rate lets you move existing credit card debt interest-free for 6 to 21 months. You pay a 3 to 5 percent transfer fee upfront, but if you can pay off the balance during the 0% period, you save a lot on interest. This only works if you already have debt to transfer, not if you need new cash.
Borrowing from family or friends is free if they agree to it, though it can strain relationships. A credit union loan is often cheaper than a bank loan and may not require a credit check if you are a member. Some employers offer paycheck advances or loans to employees at low or no cost.
If you are in a true emergency and have no other options, a cash advance is better than a payday loan, which charges much higher fees. But it should be a last resort, not a regular way to get cash.
How to minimize the cost if you do take a cash advance
If you have decided a cash advance is your best option, take steps to keep the cost as low as possible. First, withdraw only what you need. Every dollar you withdraw costs you the upfront fee plus interest, so do not take out extra cash just because it is available.
Second, pay it back as fast as you can. The interest compounds daily, so even a few extra days of carrying the balance costs you money. If you can pay back the full amount within a week, do it. If you can only pay part of it back, pay as much as you can toward the cash advance balance, since it has the highest interest rate.
Third, check whether your card issuer offers a lower cash advance rate or waived fee for certain situations. Some cards waive the fee if you are a long-time customer or have a high credit score. It never hurts to call and ask, especially if you are a good customer.
Frequently Asked Questions
What is the difference between a cash advance and a regular purchase?
A regular purchase has a grace period — usually 21 days — before interest starts. A cash advance charges interest from day one. Purchases also earn rewards points; cash advances do not. Cash advances also have a higher interest rate and an upfront fee.
Can I use a cash advance to pay off other debt?
Yes, you can use cash from a cash advance to pay off other debts, but it is usually not a good idea because the cash advance rate is so high. A balance transfer or personal loan is cheaper. If you use a cash advance to pay off a payday loan, you are trading one expensive debt for another.
Does a cash advance hurt my credit score?
A cash advance itself does not hurt your score, but it raises your credit utilization ratio, which can lower your score slightly. If you carry the balance and miss a payment, that will hurt your score much more. Paying it back quickly keeps the damage minimal.
What happens if I cannot pay back a cash advance?
If you do not pay, the balance stays on your card and keeps accruing interest at the high cash advance rate. After 30 days of non-payment, the issuer reports it to the credit bureaus, and your score drops. After 180 days, the issuer may close your account and send the debt to a collection agency.
Can I take a cash advance from a credit card I just opened?
Most card issuers let you take a cash advance as soon as your account is open, but some have a waiting period of 30 to 90 days. Check your card's terms or call the issuer to find out. Even if you can, the high fees and interest make it a poor choice.