A credit card cash advance is a short-term loan against your credit limit, not a withdrawal from your own money
When you take a cash advance on a credit card, you are borrowing money from your card issuer and receiving it as cash. You do not draw down a savings account or transfer existing funds — the card company lends you money at that moment, and you owe it back with interest and fees. The cash appears in your bank account or your hand within one to three business days, depending on the method you use.
A cash advance is separate from a regular purchase. It does not earn rewards points. It starts accruing interest when ready — there is no grace period like there is for purchases. And the interest rate is almost always higher than your regular purchase APR, often 3 to 5 percentage points above it. You also pay an upfront fee, usually 3 to 5 percent of the amount you borrow.
Because of these costs, a cash advance should be a last resort, not a convenient way to get spending money. But if you need to understand how it works, how much it will cost, and what your options are, this guide covers the mechanics and the alternatives.
Key Takeaways
- A cash advance charges an upfront fee (typically 3 to 5 percent) plus a higher interest rate than purchases, with no grace period.
- You can obtain a cash advance through an ATM, bank teller, or balance transfer check, each with different fees and processing times.
- Interest begins accruing the day you withdraw the cash, so the total cost grows quickly if you carry the balance.
- A personal loan, payday loan alternative, or credit line from your bank will almost always cost less than a cash advance.
- If you need cash urgently, calling your card issuer to ask about a lower rate or waived fee is worth doing before you proceed.
Three ways to take a cash advance
The most common method is an ATM withdrawal. You use your credit card at any ATM that accepts it, enter your PIN, and withdraw cash up to your daily limit. The limit is often lower than your credit limit — many issuers cap ATM withdrawals at $500 to $1,000 per day. The fee is charged when ready and appears on your statement within one to two business days.
A second method is to visit a bank branch in person. You bring your credit card to a teller and ask for a cash advance. This method has no daily limit (you can withdraw up to your available credit), and the teller can process it on the spot. You walk out with cash the same day. The fee still applies.
A third method is a balance transfer check. Your card issuer mails you checks that draw against your credit line. You write a check to yourself or to a payee, deposit it, and the funds appear in your bank account within three to five business days. These checks often have a separate fee structure — sometimes lower than an ATM advance, sometimes higher — so check your card agreement or call your issuer before using them.
How the fees and interest add up
Suppose you take a $500 cash advance at an ATM. Your card charges a 4 percent cash advance fee, which is $20. You owe $520 when ready. Your cash advance APR is 24 percent (higher than your 18 percent purchase APR). Interest accrues daily starting the day you withdraw the cash.
If you pay back the $520 within 30 days, the interest is roughly $30 (depending on the exact number of days and how your issuer calculates daily balance). Your total cost is $50 for borrowing $500 for a month. If you carry the balance for three months, the interest alone exceeds $70, and you are paying interest on the fee as well.
The math gets worse if you are only making minimum payments. A $500 advance with a 24 percent APR and a $20 fee will take roughly 18 to 24 months to pay off if you make only minimum payments, and you will pay $150 to $200 in interest alone. That is a 30 to 40 percent total cost on money you borrowed for a few weeks.
Your credit limit and cash advance limits
A cash advance counts against your available credit, just like a purchase does. If your credit limit is $5,000 and you take a $500 cash advance, your available credit drops to $4,500. You can still use the card for purchases up to that amount.
However, many issuers set a separate cash advance limit that is lower than your credit limit. You might have a $5,000 credit limit but only a $1,000 cash advance limit. This limit is set by the issuer and is not something you can change without calling and asking them to raise it. Check your card agreement or call the number on the back of your card to find out what your cash advance limit is before you try to withdraw.
A cash advance also affects your credit utilization ratio — the percentage of your available credit you are using. If you use a large cash advance, your utilization goes up, which can lower your credit score slightly. The effect is temporary and reverses as you pay down the balance, but it is worth knowing if you are about to explore for a loan or mortgage.
Why a personal loan or line of credit costs less
If you need cash and have time to wait a few days, a personal loan from a bank, credit union, or online lender is almost always cheaper. A personal loan has a fixed interest rate (often 8 to 15 percent for someone with decent credit), no upfront fee, and a set repayment schedule. You know exactly what you owe and when.
A home equity line of credit (HELOC) or home equity loan is even cheaper if you own a home, because the interest rate is lower and the interest may be tax-deductible. The tradeoff is that your home is collateral, so the lender can foreclose if you do not pay.
A credit union loan is worth exploring if you are a member. Credit unions often offer personal loans at lower rates than banks, and some have emergency loan programs with minimal fees. If you do not have a credit union membership, you may be able to join one through your employer or your community.
Even a payday loan alternative — a short-term loan offered by some credit unions and nonprofits — costs less than a cash advance, though it is still expensive. The key difference is that these loans have a defined term and a fixed cost, whereas a cash advance can spiral if you only make minimum payments.
What to do before you take a cash advance
Call your card issuer and ask whether they will waive the fee or lower the interest rate. Many issuers will negotiate if you have been a customer for a while or if you have good payment history. They would rather keep you as a customer than lose you to another card, and waiving a $20 fee is cheaper for them than that risk. It takes five minutes and costs nothing to ask.
If the issuer will not budge, ask whether they offer a balance transfer option to a lower-rate card. Some cards offer 0 percent APR on balance transfers for a limited time (usually 6 to 12 months), with a balance transfer fee of 3 to 5 percent. This is still not cheap, but it is better than a cash advance APR if you need time to pay it back.
If you do not have other options and you must take the cash advance, commit to paying it back as quickly as possible. Every dollar you pay toward the balance reduces the interest you owe. Paying $100 extra per month can cut your repayment time in half and save you $50 or more in interest.
How a cash advance affects your credit report
A cash advance itself does not appear separately on your credit report — it shows up as part of your credit card balance. However, the higher utilization ratio (the amount you owe divided by your credit limit) can lower your credit score by 10 to 30 points, depending on how much you borrow and how close you are to your limit.
The impact is temporary. As you pay down the balance, your utilization drops and your score recovers. If you are planning to explore for a mortgage or car loan within the next few months, it is worth avoiding a large cash advance if you can, because the timing matters.
A cash advance does not hurt your credit history or payment record unless you miss a payment. If you pay on time, there is no long-term damage to your credit. The damage is purely financial — the fees and interest you pay.
Frequently Asked Questions
Can I use a cash advance to pay off another credit card?
Technically yes, but it is a bad idea. You are borrowing at a high cash advance rate to pay off a card that might have a lower purchase APR. A balance transfer (moving the balance to a 0 percent card) is cheaper. A personal loan is cheaper. Even paying the first card slowly is cheaper than taking a cash advance to pay it off faster.
What is the difference between a cash advance and a balance transfer?
A cash advance gives you cash and charges a higher interest rate with no grace period. A balance transfer moves a balance from one card to another and often includes a promotional 0 percent APR period (usually 6 to 12 months). Both charge an upfront fee, but a balance transfer is cheaper if you need time to pay.
Do I have to pay back a cash advance before I can use my card again?
No. You can continue to use your card for purchases while you carry a cash advance balance. However, any new purchases will accrue interest at your regular purchase APR, and your minimum payment will cover both the advance and the purchases. It is straightforward to get confused about what you owe and to whom.
Can I take a cash advance with a debit card?
No. A debit card withdraws money from your own bank account, not borrowed money. What you can do with a debit card is withdraw cash at an ATM for free (or a small ATM fee). If you need to borrow money, you need a credit card or a loan product.
What happens if I only make minimum payments on a cash advance?
The balance will take 18 to 24 months to pay off, and you will pay 30 to 40 percent of the original amount in interest and fees. The issuer will report your payments on time to the credit bureaus, so your credit will not suffer, but you will pay far more than the cash was worth.