A cash advance lets you borrow money against your credit card's line of credit, but the process and cost are different from a regular purchase
A cash advance is a withdrawal of cash using your credit card at an ATM, bank, or through a cash-like transfer. The money comes from your available credit, not from a separate account. Unlike a 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 purchase rate. Most cards also charge an upfront fee, typically 3 to 5 percent of the amount withdrawn.
You can take a cash advance at any ATM that displays your card's logo, at a bank teller window, or through a balance transfer check if your card issuer sends them. The transaction posts to your account within one to three business days, and you begin paying interest from the day you withdraw the money.
Key Takeaways
- Cash advances charge interest from day one with no grace period, and the interest rate is typically 2 to 5 percentage points higher than your purchase rate.
- Most issuers charge an upfront fee of 3 to 5 percent of the amount you withdraw, in addition to interest.
- Your cash advance limit is often lower than your total credit limit and is set separately by your card issuer.
- Payments to your card go toward the lowest-interest debt first, so cash advance balances may take longer to pay off if you also carry purchase balances.
Where and how to withdraw a cash advance
The most common method is an ATM withdrawal. Insert your credit card into any ATM that accepts your card brand, enter your PIN, select "cash advance" or "withdraw cash," and choose your amount. The ATM will show you the fee before you confirm. You can withdraw up to your cash advance limit, which your card issuer sets separately from your total credit limit — it is often 20 to 50 percent of your credit limit, though it varies by card and issuer.
If you prefer not to use an ATM, you can visit a bank branch and ask a teller for a cash advance. Bring your card and ID. The teller will process the transaction the same way an ATM does, and you will pay the same fee. Some card issuers also send balance transfer checks that you can deposit into a bank account or cash at a check-cashing service — these count as cash advances and carry the same fees and interest rates.
Fees and interest rates for cash advances
Every cash advance carries two costs: an upfront fee and ongoing interest. The upfront fee is usually 3 to 5 percent of the amount withdrawn, with a minimum fee of $2 to $10. So a $500 cash advance might cost $15 to $25 just to take it out. This fee is added to your balance when ready.
The interest rate on cash advances is set by your issuer and is almost always higher than your purchase rate. If your purchase APR is 18 percent, your cash advance APR might be 24 or 28 percent. Interest accrues daily from the moment you withdraw the money — there is no interest-free period like there often is for purchases. This means a $500 cash advance at 25 percent APR costs roughly $3.42 per day in interest alone.
To find your card's cash advance fee and APR, check your card's terms and conditions document or log into your online account. If you cannot find it, call the number on the back of your card and ask the issuer directly.
How cash advances affect your credit and payment priority
A cash advance does not hurt your credit score directly, but it does increase your credit utilization — the percentage of your available credit you are using. If you have a $5,000 limit and take a $1,000 cash advance, your utilization jumps to 20 percent. High utilization can lower your score temporarily, and the effect is larger if you also carry purchase balances.
When you make a payment to your card, the issuer applies it to your lowest-interest debt first. If you have both a purchase balance at 18 percent and a cash advance balance at 25 percent, your payment goes toward the purchase balance first. This means your cash advance balance stays higher longer and costs more in interest. To pay off a cash advance faster, you may need to pay more than the minimum or make extra payments specifically toward the cash advance balance — though most issuers do not let you direct payments to a specific type of debt.
When a cash advance makes sense and when it does not
A cash advance is expensive and should be a last resort, not a routine way to get cash. It makes sense only in a genuine emergency when you need cash when ready and have no other option — for example, if you are traveling and your debit card is lost and you need money to get home. Even then, the cost is steep: a $300 cash advance at 5 percent fee plus 25 percent APR costs $15 upfront and roughly $6 per month in interest if you pay it back over three months.
A cash advance does not make sense for everyday cash needs, because you are paying a fee plus high interest on money you could withdraw from your own bank account for free. It also does not make sense as a way to move money between accounts or to pay bills — you will pay the fee and interest with no benefit. If you are considering a cash advance because you cannot cover your expenses, that is a sign to look at your budget or seek financial counseling, not to borrow at high cost.
Alternatives to a cash advance
Before you take a cash advance, consider these lower-cost options. If you need cash, withdraw it from your bank account's checking or savings account — this costs nothing. If you need to borrow money, a personal loan from a bank or credit union usually has a lower interest rate than a cash advance, though it takes longer to process. A balance transfer to a 0 percent introductory APR card can help you move existing debt at lower cost, though this does not give you cash.
If you are short on money regularly, a line of credit from your bank or a small personal loan may be cheaper than repeated cash advances. If you are in a financial crisis, contact a nonprofit credit counselor through the National Foundation for Credit Counseling — they offer free or low-cost guidance on managing debt and budgeting.
How to pay off a cash advance quickly
The fastest way to pay off a cash advance is to treat it as a priority and pay more than the minimum. Calculate what you owe: the amount withdrawn plus the upfront fee, plus the interest that has accrued. Then set a target payoff date — for example, three months — and divide the total by that number to find your monthly payment. If you owe $515 (a $500 advance plus $15 fee) and want to pay it off in three months, you need to pay roughly $172 per month to cover the balance and interest.
Make payments as soon as possible after the statement closes, because interest accrues daily. Paying on day 5 of your billing cycle costs less than paying on day 25. If you have the cash to pay off the entire balance at once, do that — every day you carry the balance costs you money in interest.
Frequently Asked Questions
Can I take a cash advance if I have a low credit limit?
Yes, but your cash advance limit is usually much lower than your total credit limit. If your card has a $2,000 limit, your cash advance limit might be only $400 or $500. Check your card's terms or call your issuer to find out your specific cash advance limit.
Does a cash advance show up on my credit report?
A cash advance itself does not appear separately on your credit report — it is part of your overall credit card balance. However, if you carry a high balance or miss payments, that shows up and can hurt your score. The cash advance increases your utilization, which can lower your score temporarily.
What happens if I cannot pay back a cash advance?
If you do not pay, the balance accrues interest and late fees, and your credit score drops. After 30 days, the issuer reports the late payment to credit bureaus. After 180 days, the account may be charged off and sent to a collection agency. Contact your issuer when ready if you cannot pay — they may offer a hardship plan or lower interest rate.
Is there a way to avoid the cash advance fee?
No. Every credit card charges a fee for cash advances, and it is non-negotiable. Some cards have higher fees than others, but there is no card that waives the fee entirely. The only way to avoid it is to not take a cash advance.