A cash advance lets you borrow money against your credit card limit at an ATM or bank, but it costs more than a regular purchase
A cash advance is a short-term loan you take from your credit card issuer. You go to an ATM, bank, or sometimes a convenience store and withdraw cash using your card, similar to using a debit card. The money comes from your available credit limit, not from a checking 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 regular purchase rate.
You can get a cash advance in three ways: at an ATM using your PIN, at a bank teller by showing your card and ID, or through a convenience check your card issuer mails you. The process is fast — you walk out with cash the same day. But the cost is steep enough that most people should treat it as a last resort, not a routine way to get spending money.
Key Takeaways
- Cash advances charge interest from day one, with rates typically 3 to 5 percentage points higher than your card's purchase rate, and most cards charge an upfront fee of 3 to 5 percent of the amount withdrawn.
- You need your card and your PIN to withdraw cash at an ATM, or you can visit a bank teller with your card and ID, or use a convenience check if your issuer sent one.
- The interest accrues daily and compounds, so a $500 cash advance can cost $50 to $100 in fees and interest within a month depending on your card's terms.
- Paying off a cash advance takes priority over purchases because the higher interest rate means the debt grows faster, so send extra payments toward the cash advance balance first.
What happens when you take a cash advance
The moment you withdraw the cash, two costs attach to it. First, your card issuer charges an upfront fee, usually 3 to 5 percent of the amount you withdraw. A $500 cash advance costs $15 to $25 before you spend a dollar. Second, interest starts accruing when ready at a rate that varies by card but is typically 3 to 5 percentage points higher than your purchase rate. If your purchase rate is 18 percent, your cash advance rate might be 23 percent.
The interest compounds daily, meaning each day's interest gets added to the balance and then earns interest itself. A $500 cash advance at 23 percent annual interest costs roughly $9.58 in interest during the first month if you make no payment. Add the upfront fee and you are already $24 to $34 in the hole. The longer you carry the balance, the faster it grows.
Cash advances also do not benefit from the same payment rules as purchases. When you make a payment to your card, the issuer applies it to the lowest-interest debt first — usually purchases — and the cash advance sits there accruing interest at the higher rate. This is why a cash advance can become expensive very quickly even if you are paying your card on time.
How to get cash at an ATM or bank
At an ATM, insert your credit card and enter your PIN. The ATM will show your available cash advance limit, which is often lower than your total credit limit. Select the amount you want and withdraw it. Some ATMs charge an additional fee — $2 to $5 — on top of your card issuer's cash advance fee. Check your card's terms to see if your issuer charges ATM fees.
At a bank, go to the teller and ask for a cash advance on your credit card. Bring your card and a photo ID. The teller will process it the same way and hand you cash. Banks do not usually charge an extra fee for this service, so it can be cheaper than an ATM if your card issuer charges ATM fees.
Some card issuers mail convenience checks that work like regular checks but draw from your credit line. You write the check to yourself or a payee, deposit or cash it, and the amount becomes a cash advance with the same fees and interest. Convenience checks are slower than an ATM but useful if you need to pay a bill that does not take credit cards.
The real cost: fees and interest compared
To see why cash advances are expensive, compare the cost of a $500 cash advance to a $500 purchase on the same card. Assume your purchase rate is 18 percent and your cash advance rate is 23 percent, with a 4 percent cash advance fee.
| $500 Purchase | $500 Cash Advance | |
|---|---|---|
| Upfront fee | $0 | $20 (4%) |
| Interest rate | 18% | 23% |
| Interest in 30 days (no payment) | $7.50 | $9.58 |
| Total cost in 30 days | $7.50 | $29.58 |
Over 30 days with no payment, the cash advance costs nearly four times as much. Over three months, the gap widens further. This is why using a cash advance for everyday expenses — groceries, gas, rent — is almost always more expensive than using a debit card, a personal loan, or even a credit card purchase.
When a cash advance might make sense
A cash advance is rarely the best option, but there are narrow situations where it might be the fastest way to handle an emergency. If you need cash when ready and have no other source — no savings, no access to a personal loan, no family to borrow from — and you can pay it back within a week or two, the total cost might be manageable.
For example, if your car breaks down and the mechanic needs $800 cash today, and you can pay it back from your next paycheck in five days, a cash advance might cost $32 to $40 in fees and interest. That is still expensive, but it is cheaper than a tow truck, a rental car, and a late fee on your rent. The key is paying it back as fast as possible.
A cash advance almost never makes sense for regular spending, travel money, or anything you cannot pay back within a few weeks. If you are considering a cash advance for a bill you cannot afford, that is a sign to look at other options first: a payment plan with the creditor, a personal loan from a credit union, a 0 percent balance transfer card, or a conversation with a credit counselor about your budget.
How to pay off a cash advance quickly
Once you have taken a cash advance, your goal is to pay it off before the interest compounds. Make a payment as soon as you can, even if it is just a partial payment. Every dollar you send reduces the balance that interest is charging on.
When you make a payment, direct it toward the cash advance, not the purchase balance. Call your card issuer or log into your account and ask if you can specify where your payment goes. Some issuers let you do this; others explore payments to the lowest-interest debt first, which means your payment goes to purchases while the cash advance keeps growing. If your issuer does not let you direct payments, send extra money beyond your minimum payment so there is no question that you are paying down the cash advance.
If you have multiple cards, prioritize paying off the cash advance on the card with the highest rate. A cash advance at 25 percent is costing you more per day than a purchase at 18 percent, so it should get your money first.
Alternatives to a cash advance
Before you go to an ATM, consider these options. A personal loan from a credit union or bank usually has a lower interest rate than a cash advance and no upfront fee. If you are a credit union member, you might get a rate of 12 to 18 percent, which is cheaper than most cash advance rates. The downside is that approval takes a few days, not minutes.
A 0 percent balance transfer card can move an existing balance from another card to a new card with no interest for 6 to 21 months, depending on the card. This does not help you get cash, but if you are trying to move a cash advance balance you already have, it can save you hundreds in interest. The catch is that you need to be approved for a new card, which takes a few days.
A payment plan with the creditor — your landlord, utility company, or medical provider — often costs nothing. Many creditors will let you split a bill into smaller payments if you call and ask. This is free and faster than a loan.
A payday loan is another short-term option, but it is usually more expensive than a cash advance. Payday loans charge 400 percent annual interest or more, so they should be a last resort.
Frequently Asked Questions
Can I get a cash advance if my credit is bad?
Yes. A cash advance draws from your existing credit limit, not from a new credit decision. If you already have the card and have not maxed it out, you can get a cash advance regardless of your credit score or recent payment history. The card issuer has already decided to lend you money; a cash advance is just a different way to use that credit.
Does a cash advance hurt my credit score?
Not directly. The cash advance itself does not appear on your credit report. However, if the cash advance increases your credit utilization — the percentage of your total credit limit you are using — your score may drop slightly. If you pay it off quickly, the impact is temporary. If you carry the balance for months, the high utilization will keep your score lower until you pay it down.
What is the difference between a cash advance and a balance transfer?
A cash advance gives you cash from your credit line. A balance transfer moves debt from one card to another, usually at a lower interest rate. A balance transfer does not give you cash; it moves existing debt. If you need actual money in your hand, you need a cash advance. If you are trying to move an existing balance to a cheaper card, a balance transfer is the better option.
Can I use a cash advance to pay off other debt?
Technically yes, but it is usually a bad idea. A cash advance costs more than most other types of borrowing, so using it to pay off a lower-rate debt means you are replacing cheap debt with expensive debt. The only exception is if you are paying off a payday loan or other extremely high-rate debt and can pay the cash advance back within days.
What happens if I cannot pay back the cash advance?
The balance stays on your card and keeps accruing interest at the higher rate. If you miss payments, your card issuer will charge late fees and may raise your interest rate further. The debt will eventually be reported to credit bureaus and damage your credit score. If you are struggling to pay, contact your card issuer to ask about a hardship program or payment plan, or speak with a credit counselor about your options.