A cash advance lets you borrow money against your credit limit, 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 branch, or convenience store and withdraw cash up to a set limit — usually 20 to 50 percent of your total credit limit. The money hits your account when ready, but the cost is steep: you pay a fee (typically 3 to 5 percent of the amount withdrawn) plus a higher interest rate than you would on purchases, often 20 to 30 percent annual percentage rate (APR). Interest starts accruing the day you withdraw, with no grace period.
Most people use cash advances when they need cash urgently and have no other way to get it. The speed is real — you can have money in your hand within minutes. But the cost is also real, and it compounds fast. If you borrow $500 at a 25 percent APR with a 4 percent fee, you pay $20 upfront plus roughly $10 in interest per month if you carry the balance.
Key Takeaways
- Cash advances charge an upfront fee (usually 3 to 5 percent) plus a higher interest rate than purchases, with no grace period.
- You can withdraw cash at ATMs, bank branches, or convenience stores using your credit card PIN or by requesting cash back.
- Your cash advance limit is often lower than your credit limit and is set by your card issuer.
- Paying off a cash advance should be your priority because the interest rate is higher than almost any other form of borrowing.
- If you need cash regularly, a personal loan or line of credit from a bank will cost you far less over time.
Where and how to withdraw a cash advance
You have three main routes to get cash from your credit card. The most common is an ATM — you insert your card, enter your PIN, and withdraw up to your daily limit (which your issuer sets separately from your cash advance limit). ATMs charge a fee on top of your card issuer's fee, usually $2 to $3 per transaction.
You can also go to your card issuer's bank branch in person. Bring your card and ID, tell the teller you want a cash advance, and they will process it on the spot. This route avoids the ATM fee but requires a trip during business hours.
A third option is to request cash back at a retail store when you make a purchase. You pay for something small with your credit card and ask for cash back. This counts as a cash advance and carries the same fees and interest rate, but it saves you a separate ATM trip. Some stores limit cash back to $20 or $50, so this works only for small amounts.
Understanding your cash advance limit and fees
Your card issuer sets a cash advance limit separately from your regular credit limit. You might have a $5,000 credit limit but only a $1,500 cash advance limit. You can find your limit by logging into your account online, calling the issuer's customer service number on the back of your card, or checking your most recent statement.
The fee structure is straightforward but worth calculating before you withdraw. Most issuers charge a flat percentage of the amount you take — typically 3, 4, or 5 percent — with a minimum fee of $5 to $10. So a $200 advance at 4 percent costs $8 upfront. A $1,000 advance at 4 percent costs $40. Some cards charge a flat dollar amount instead (like $10 per advance), which is better if you are withdrawing small amounts.
The interest rate on cash advances is separate from your purchase APR. Check your card's terms or call the issuer to find out what rate applies. Unlike purchases, which often have a grace period before interest accrues, cash advance interest starts the day you withdraw the money. There is no way around this.
How cash advances affect your credit and account
A cash advance counts as a debt on your credit card account, just like a purchase does. It increases your credit utilization — the percentage of your available credit you are using — which can lower your credit score if your utilization jumps above 30 percent. The effect is temporary and reverses as you pay down the balance, but it is when ready.
The cash advance also appears on your credit report as part of your credit card balance. If you carry it for several months, the interest charges will be visible to anyone reviewing your account, including future lenders. This is one reason to prioritize paying it off quickly.
One more thing: if you pay your credit card bill, the payment goes toward your lowest-interest debt first. That means if you have both a purchase balance and a cash advance balance, your payment covers the purchase first, leaving the cash advance to accrue interest longer. Some issuers let you specify where a payment goes, but most do not. This is another reason to pay off the cash advance as soon as you can.
When a cash advance makes sense versus when it does not
A cash advance makes sense only in narrow situations. If you need cash for an emergency — a car repair, a medical bill, a deposit on an apartment — and you have no other way to get it, a cash advance is faster than a personal loan. You have the money in minutes, not days. If you can pay it back within a month or two, the total cost is manageable.
A cash advance does not make sense if you have other options. A personal loan from a bank or credit union typically charges 6 to 12 percent APR with no upfront fee — far cheaper than a cash advance. A line of credit works the same way. Even a payday loan, which is expensive, is often cheaper than a cash advance if you repay it within two weeks. If you have a friend or family member who can lend you the money interest-free, that is always better.
A cash advance also does not make sense if you cannot pay it back quickly. If you are thinking of using a cash advance to cover regular expenses because your paycheck is short, you are building a debt trap. The interest will compound, and you will owe more next month, forcing you to borrow again. This cycle is hard to break.
Steps to pay off a cash advance quickly
Once you have taken a cash advance, your goal is to eliminate it before interest eats away your money. Here is the order of operations.
First, stop using the card for new purchases. Every new purchase adds to your balance and extends the time you carry debt. Put the card away.
Second, pay more than the minimum. Your statement will show a minimum payment — often just the interest and fees. Paying only the minimum means you are barely covering the interest; the principal stays almost unchanged. Pay as much as you can afford each month until the balance is zero.
Third, consider a balance transfer if your card offers one. Some issuers let you transfer a cash advance balance to a 0 percent APR promotional period (usually 6 to 12 months). You would still owe the original cash advance fee, but you would stop accruing interest. Read the terms carefully — balance transfers sometimes charge their own fee, and the 0 percent rate applies only if you make no new purchases.
Fourth, if you cannot pay it off in a few months, look into a personal loan to pay off the cash advance. A personal loan at 10 percent APR is cheaper than carrying a cash advance at 25 percent, even after accounting for the loan origination fee. You would pay less total interest and have a fixed payoff date.
Alternatives to a cash advance
Before you take a cash advance, consider these cheaper options. A personal loan from a bank, credit union, or online lender typically charges 6 to 18 percent APR depending on your credit score and the lender. There is no upfront fee, and you get a fixed monthly payment and a set payoff date. The process takes a few days, but the total cost is lower than a cash advance.
A line of credit works like a personal loan but lets you borrow only what you need and pay interest only on what you use. Credit unions often offer these at rates lower than banks. The process takes longer, but if you think you might need cash in the future, setting one up now saves you from the cash advance trap later.
A payday loan is expensive — often 400 percent APR or higher — but it is cheaper than a cash advance if you repay it within two weeks. If you need $500 for two weeks, a payday loan costs roughly $30 to $50 in fees. A cash advance costs $20 in fees plus $10 in interest, so the math is close. But payday loans are designed to trap you into rolling over the debt, so use this option only if you are certain you can repay it on your next payday.
If you have family or friends who can lend you money, that is always the cheapest option. There is no interest, no fee, and no credit impact. The only cost is the relationship if you do not repay on time, so be clear about when you will pay it back and stick to that date.
Frequently Asked Questions
Can I take a cash advance if I have a low credit score?
Yes. Your cash advance limit is based on your credit limit, not your credit score. If your card issuer approved you for a card, they have already set a cash advance limit. You can use it regardless of your score. However, a low score may mean your cash advance limit is lower than someone with a high score.
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, usually at a lower rate or 0 percent for a promotional period. Balance transfers are for moving existing debt; cash advances are for getting cash. Both charge fees and affect your credit utilization.
Will a cash advance hurt my credit score?
It can, temporarily. Taking a cash advance increases your credit utilization, which may lower your score by 10 to 50 points depending on how much you borrow. The effect fades as you pay down the balance. A cash advance does not hurt your score in the long term if you pay it off within a few months.
Can I take a cash advance from multiple cards?
Yes, you can take a cash advance from each card you own, up to each card's cash advance limit. But this is a warning sign. If you are borrowing from multiple cards, you are likely in financial trouble and should talk to a credit counselor or financial advisor about a longer-term plan.
What happens if I do not pay back a cash advance?
The balance stays on your card and accrues interest at the cash advance rate. After 30 days of missed payments, the issuer reports it to the credit bureaus, damaging your credit score. After 180 days, the issuer may charge off the account and sell the debt to a collection agency. You could face lawsuits and wage garnishment. Do not ignore a cash advance balance.