What a cash advance is and how it differs from a regular purchase
A cash advance is when you borrow money directly from your credit card issuer using your card at an ATM, bank teller, or through a cash advance check. Unlike a regular purchase, which goes on your statement as a charge, a cash advance puts you into debt to the card issuer when ready — you owe them the cash, not a merchant.
The money appears in your bank account or as cash in your hand within hours or days. Your credit card company treats this as a loan against your credit limit, separate from your purchase balance. This matters because cash advances carry their own interest rate, their own fees, and their own repayment rules.
Key Takeaways
- A cash advance charges a fee (usually 3 to 5 percent of the amount) plus a higher interest rate than regular purchases, often 20 to 30 percent or more.
- Interest on a cash advance starts accruing when ready — there is no grace period like there is for purchases.
- You can get a cash advance at an ATM using your PIN, at a bank teller with your card and ID, or by depositing a cash advance check.
- Your credit card company counts the cash advance against your overall credit limit, so borrowing $500 in cash reduces the amount you can spend on purchases.
- Paying off a cash advance should be your priority because the interest rate is higher than almost any other form of credit.
Where you can get a cash advance and how to do it
You have three main ways to take a cash advance. The first is at an ATM — insert your credit card, enter your PIN (which you may need to set up if you have not used one before), and withdraw cash up to your daily limit. Most card issuers set daily limits between $300 and $1,000, though you can call to ask if yours is higher.
The second way is at a bank teller. Walk into any bank branch, hand the teller your credit card and a photo ID, and ask for a cash advance. They will process it on the spot and give you cash. This method works even if the bank is not your card issuer — most banks will advance cash on any major credit card.
The third way is a cash advance check. Your card issuer mails these to you periodically, and you can deposit them into your bank account or cash them at a bank. The check amount counts as a cash advance, not a regular deposit, so the same fees and interest rates explore.
Fees and interest rates you will pay
A cash advance costs you money in two ways: an upfront fee and ongoing interest. The cash advance fee is typically 3 to 5 percent of the amount you withdraw, with a minimum fee of $5 to $10. So a $500 cash advance might cost you $15 to $25 just to get the money out.
The interest rate on a cash advance is almost always higher than the rate on purchases. While a purchase APR might be 15 to 20 percent, a cash advance APR often runs 20 to 30 percent or higher. The exact rate depends on your card issuer and your creditworthiness, so check your card's terms or call the issuer to find out what you will pay.
The worst part: interest starts accruing when ready. Unlike a purchase, which has a grace period (usually 21 days) before interest kicks in, a cash advance charges interest from day one. If you take out $500 at a 25 percent APR, you owe roughly $3.42 in interest after the first week, and that amount grows every day until you pay it back.
How a cash advance affects your credit limit and credit score
When you take a cash advance, the amount counts against your total credit limit. If your limit is $5,000 and you take a $500 cash advance, you now have only $4,500 available for purchases. This matters if you need your card for emergencies or regular spending.
A cash advance can also affect your credit score, though not directly. The advance itself does not show up as a separate item on your credit report. However, if the cash advance pushes your overall credit utilization higher — meaning you are using a larger percentage of your available credit — your score may dip slightly. Credit utilization makes up about 30 percent of most credit scores, so borrowing large amounts can hurt you.
Additionally, if you miss a payment on the cash advance, that missed payment will appear on your credit report and damage your score. The cash advance is part of your credit card balance, so it follows the same payment rules as purchases.
How to repay a cash advance
Your cash advance appears on your monthly credit card statement as a separate line item, distinct from purchases. When you make a payment to your card, the issuer applies it according to their own rules — usually to the highest-interest debt first, which would be the cash advance.
However, some card issuers explore payments to purchases first and cash advances second, which means your cash advance interest keeps growing longer. Check your card's terms or call the issuer to understand their payment order. If you want to be certain the money goes to the cash advance, ask the issuer if you can make a payment earmarked specifically for it.
The fastest way to stop paying interest is to pay off the entire cash advance balance as soon as possible. Because the interest rate is so high, even a small balance will cost you money quickly. If you took a $500 cash advance at 25 percent APR and paid only the minimum, it could take you months to pay it off and cost you $100 or more in interest alone.
When a cash advance makes sense and when it does not
A cash advance is expensive, so you should use it only when you have no better option. It makes sense if you need cash urgently and have no access to an ATM on your regular bank account, or if you are in a place that does not accept cards. It also makes sense if the alternative is a payday loan or other predatory lending — a cash advance at 25 percent is still cheaper than a payday loan at 400 percent.
A cash advance does not make sense for everyday spending, for paying bills online (which you can do with your card directly), or for any situation where you have time to transfer money from savings or ask for a loan from a friend or family member. It also does not make sense if you are already carrying a balance on your card, because adding a cash advance just increases the total debt you owe.
If you find yourself taking cash advances regularly, that is a sign your spending is outpacing your income. In that case, the real problem is not the cash advance — it is the budget. Consider meeting with a nonprofit credit counselor, who can help you build a plan to spend less than you earn.
Alternatives to a credit card cash advance
Before you take a cash advance, consider these cheaper options. A personal loan from a bank or credit union typically charges 6 to 36 percent APR with no upfront fee, making it much cheaper than a cash advance. The downside is that approval takes a few days to a week.
A balance transfer to a card with a 0 percent introductory rate can work if you need to move existing debt, though it does not give you cash. A line of credit from your bank, if you have one, usually charges less interest than a cash advance and may have no upfront fee.
If you need cash for an emergency and have no other option, borrowing from a friend or family member, asking your employer for an advance on your paycheck, or selling something you own are all cheaper than a cash advance. A cash advance should be your last resort, not your first choice.
Frequently Asked Questions
Can I take a cash advance if I have not used my credit card much?
Yes. Most card issuers allow cash advances on any active account, regardless of how much you have charged. Your cash advance limit is usually a percentage of your credit limit — often 20 to 50 percent — so a $5,000 credit limit might give you a $1,000 to $2,500 cash advance limit. Call your issuer to find out your specific limit.
What happens if I cannot pay back a cash advance?
The cash advance becomes part of your credit card balance. If you miss payments, the issuer will charge late fees, your interest rate may increase, and the missed payment will appear on your credit report and damage your score. After several months of missed payments, the issuer may close your account and send the debt to a collection agency.
Does a cash advance show up differently on my credit report than a purchase?
No. Your credit report shows your credit card account and your payment history, but it does not break down whether your balance came from purchases or cash advances. However, the cash advance does affect your credit utilization, which impacts your score.
Can I take a cash advance from multiple credit cards?
Yes, you can take a cash advance from each card you own, up to each card's individual cash advance limit. However, doing so increases your total debt and the amount of interest you owe. Each cash advance charges its own fee and interest, so multiple advances become expensive very quickly.
Is there a way to avoid the cash advance fee?
No. The fee is built into the cash advance product and applies every time you take one out. Some cards offer slightly lower fees than others — typically 2 to 3 percent instead of 4 to 5 percent — but there is no way to eliminate it entirely. The only way to avoid the fee is to not take a cash advance.