What a cash advance is and how it works
A cash advance is a short-term loan you take from your credit card issuer. You walk into an ATM, bank branch, or convenience store and withdraw cash using your card, just like you would with a debit card. The money hits your account when ready, but the credit card company treats it as a loan, not a purchase. You pay it back through your regular credit card bill.
The catch is that cash advances cost more than regular purchases. You pay an upfront fee (usually 3 to 5 percent of the amount withdrawn), and the interest rate is higher than your standard purchase APR. Interest starts accruing the day you withdraw the money — there is no grace period like there is for purchases. If you carry a balance, the cash advance interest compounds daily until you pay it off.
Credit card companies set a cash advance limit, which is often lower than your credit limit. You might have a $5,000 credit limit but only a $1,500 cash advance limit. Your issuer sets this limit based on your credit history and account activity, and you can call to ask what yours is before you attempt a withdrawal.
Key Takeaways
- Cash advances charge an upfront fee of 3 to 5 percent plus a higher interest rate than purchases, with interest starting when ready.
- You can withdraw cash at ATMs, bank branches, or convenience stores using your credit card, up to your cash advance limit.
- Your cash advance limit is separate from and usually lower than your overall credit limit.
- Paying off a cash advance should be your priority because the interest compounds daily and costs more than carrying a purchase balance.
- Some credit cards marketed to people rebuilding credit or with limited options charge cash advance fees of 10 percent or higher.
Where you can withdraw a cash advance
The most common place to get a cash advance is an ATM. Insert your credit card into any ATM — not just your bank's machines — select "cash advance" or "cash withdrawal," enter your PIN, and choose the amount. The transaction posts to your credit card account within one business day, and you have the cash in hand when ready.
If you do not know your PIN or need to set one, call the number on the back of your card and ask the issuer to send you a PIN or reset it. Some issuers let you set a PIN online through your account portal. You will need the PIN to use an ATM; you cannot withdraw a cash advance without it.
You can also get a cash advance at a bank branch. Walk into any branch of your card issuer's bank (or sometimes any bank that partners with your issuer) and ask the teller for a cash advance. Bring your card and ID. The teller will process it on the spot, and you walk out with cash. This route is slower than an ATM but useful if you have questions or need help.
Some convenience stores and check-cashing businesses offer cash advances on credit cards, though fees may be higher than ATM withdrawals. Call ahead to confirm they accept your card and what their fee structure is.
Understanding the fees and interest rates
Every cash advance carries two costs: a one-time fee and a higher interest rate. The cash advance fee is charged the moment you withdraw the money and appears on your next statement. Most cards charge 3 to 5 percent of the amount withdrawn, with a minimum fee of $5 to $10. If you withdraw $500, expect to pay $15 to $25 in fees alone.
The cash advance APR is the interest rate applied to the balance. This rate is almost always higher than your purchase APR — sometimes 5 to 10 percentage points higher. If your purchase APR is 18 percent, your cash advance APR might be 25 or 28 percent. This rate is set by your issuer and listed in your card's terms and conditions.
Interest on a cash advance starts accruing the day you withdraw it. Unlike purchases, which have a grace period (usually 21 to 25 days before interest kicks in), cash advances have no grace period. If you withdraw $500 on January 1 and do not pay it back until February 1, you owe interest for the full 31 days.
To see your exact cash advance fee and APR, log into your online account or call the number on the back of your card. The terms are also in your cardholder agreement, which you can request by mail or read from your issuer's website.
How cash advances affect your credit score
A cash advance does not directly hurt your credit score the way a missed payment does, but it can indirectly lower your score by raising your credit utilization ratio. Your credit utilization is the percentage of your available credit you are using. If you have a $5,000 credit limit and carry a $1,000 balance, your utilization is 20 percent.
A cash advance counts toward your overall credit utilization. If you withdraw $500 in cash, your utilization goes up by that amount, which can lower your score slightly. The effect is temporary — once you pay off the cash advance, your utilization drops and your score recovers.
The bigger risk is carrying the cash advance balance month to month. High interest charges make it straightforward to fall behind, and missed payments will damage your credit. Paying off a cash advance as quickly as possible protects both your score and your wallet.
How to repay a cash advance
A cash advance is repaid through your regular credit card payment, just like any other balance. When your statement arrives, it will show the cash advance amount, the fee, and any interest charged. You can pay the full amount, the minimum payment, or anything in between.
If you carry a balance, credit card companies typically explore your payment to the lowest-interest debt first — usually purchases — and leave the cash advance balance to accrue interest. To pay off the cash advance faster, contact your issuer and ask them to explore your next payment directly to the cash advance balance. Some issuers let you do this through their online portal; others require a phone call.
The most straightforward approach is to pay the full cash advance amount as soon as your statement arrives. This stops interest from compounding and gets you out of debt faster. If you cannot pay it all at once, make the largest payment you can afford and repeat each month until the balance is zero.
When a cash advance makes sense and when it does not
A cash advance is useful when you need cash urgently and have no other option. Examples include paying a medical bill that only accepts cash, covering an emergency car repair, or getting cash when traveling to a country where card payments are not widely accepted.
A cash advance does not make sense if you are trying to move debt from one card to another — a balance transfer is cheaper and designed for that purpose. It also does not make sense if you are already carrying high credit card debt, because the additional interest will make your situation worse. And it does not make sense if you are using it to fund spending you cannot afford; that is a sign you need to cut expenses or find additional income, not borrow at high rates.
Before you withdraw a cash advance, ask yourself: Do I need this money today, or can I wait? Can I pay this back within one or two months? Is there a cheaper way to get this money — a personal loan, a line of credit, or borrowing from family? If you answer no to the first question or yes to the last one, a cash advance is probably not your best option.
Frequently Asked Questions
What is the difference between a cash advance and a balance transfer?
A cash advance gives you physical cash and charges a fee plus a high interest rate. A balance transfer moves debt from one card to another and often has a lower introductory rate (sometimes 0 percent for 6 to 12 months). Balance transfers are designed for moving existing debt; cash advances are for getting cash in hand.
Can I use a cash advance to pay off another credit card?
Technically yes, but it is not a good idea. You would pay the cash advance fee, then pay the higher cash advance interest rate on top of it. A balance transfer card or a personal loan would be cheaper. If you are trying to consolidate debt, explore those options first.
What happens if I do not pay back a cash advance?
It works like any other credit card debt. Interest keeps accruing, your balance grows, and if you miss payments, your credit score drops and your issuer may charge late fees. Eventually, the account could be sent to collections. Pay what you can as soon as you can to avoid this spiral.
Can I get a cash advance if my credit is poor?
Yes, as long as your card has a cash advance limit. Even cards for people rebuilding credit usually allow cash advances, though the fees may be higher (sometimes 10 percent or more). Check your cardholder agreement or call your issuer to confirm your limit and fee.
Does a cash advance show up on my credit report?
The withdrawal itself does not appear on your credit report, but the balance does. It shows up as part of your credit card balance and affects your utilization ratio. If you miss payments on the cash advance, those missed payments will appear on your report.