A cash advance lets you borrow money against your credit limit, but it costs more than a regular purchase
A cash advance is a withdrawal of cash from your credit card account, treated as a loan rather than a purchase. You can get one at an ATM using your PIN, at a bank teller window, or through a cash advance check mailed by your card issuer. The money hits your account when ready, but the cost is steep: you pay a fee (usually 3 to 5 percent of the amount withdrawn), interest starts accruing the same day with no grace period, and the interest rate is typically higher than your purchase APR.
Most people use cash advances when they need cash urgently and have no other option. But because of the fees and when ready interest, a cash advance should be a last resort — not a regular way to access money. If you are considering one, understand the full cost before you proceed.
Key Takeaways
- Cash advances charge an upfront fee (typically 3 to 5 percent) plus a higher interest rate than purchases, with interest starting when ready.
- You can withdraw cash at an ATM with your PIN, at a bank teller, or by depositing a cash advance check — each method has the same fees and rates.
- The interest rate for cash advances varies by card issuer and is usually 2 to 5 percentage points higher than your purchase APR.
- Repaying a cash advance first (before purchases) can save money because the higher interest rate applies only to the cash advance balance.
Where and how to get a cash advance
You have three main ways to take a cash advance. The fastest is an ATM: insert your card, enter your PIN (which you may need to set up first if you have never used it), and select "cash advance" or "withdraw cash." The ATM will show you the fee and ask you to confirm before dispensing money.
The second method is a bank teller. Walk into any bank branch (not necessarily your card issuer's bank) with your credit card and ask for a cash advance. The teller will process it on the spot, charge the fee, and hand you cash. This method works even if you do not have a PIN set up.
The third method is a cash advance check. Your card issuer may mail you checks tied to your credit line. You deposit the check into your bank account like any other check, and the amount is charged to your credit card as a cash advance. This method is slower (takes a few business days to clear) but useful if you need to move money into a checking account rather than carry cash.
Understanding the fees and interest rates
Every cash advance charges two costs: a one-time fee and ongoing interest. The fee is usually a flat dollar amount (often $5 to $10) or a percentage of the amount withdrawn (typically 3 to 5 percent), whichever is higher. So a $500 cash advance might cost $15 to $25 in fees alone.
The interest rate is separate from the fee. Your card issuer sets a cash advance APR, which is almost always higher than your purchase APR — often by 2 to 5 percentage points. If your purchase rate is 18 percent, your cash advance rate might be 23 percent. Interest begins accruing the day you take the advance; there is no grace period like there is for purchases. This means interest starts piling up when ready, even if you pay the full balance when your statement arrives.
To see your card's specific cash advance fee and APR, check your card's terms and conditions document (usually available on your issuer's website) or call the customer service number on the back of your card.
How a cash advance affects your credit and account
A cash advance counts as a balance on your credit card, just like a purchase does. It increases your credit utilization ratio — the percentage of your available credit you are using — which can lower your credit score if the ratio climbs above 30 percent. The impact is temporary and reverses as you pay down the balance, but it happens when ready.
The cash advance also appears on your credit report as a separate line item on your credit card account. It does not create a new account or hard inquiry, so it does not damage your score the way a new credit card would. But the higher utilization and the fact that you are carrying a balance can both affect your score until the advance is repaid.
One important detail: if you carry a balance on your card, your minimum payment goes toward the lowest-interest debt first (usually purchases), not the cash advance. This means the cash advance sits at a higher rate while you pay down cheaper debt. To minimize interest, pay more than the minimum and direct extra payments toward the cash advance balance.
Comparing the total cost of a cash advance
The real cost of a cash advance is the fee plus the interest you pay before the balance is gone. Here is a concrete example: a $500 cash advance at a 4 percent fee ($20) and a 23 percent APR costs $20 upfront. If you pay it back in full in one month, you owe roughly $9.58 in interest, for a total cost of about $30. If you take three months to repay it, the interest grows to roughly $29, and your total cost is about $49.
Compare this to alternatives. A personal loan from a bank or credit union typically charges 6 to 36 percent APR with no upfront fee, so the total cost over three months might be $15 to $45 depending on the rate. A payday loan charges much higher rates but is a one-time transaction. A balance transfer to a 0 percent promotional card (if you may have access to) costs nothing for the promotional period, though there is usually a 3 to 5 percent transfer fee upfront.
Before taking a cash advance, calculate the total cost and compare it to these other options. In many cases, a personal loan or a balance transfer card will cost less.
Repaying a cash advance quickly
The fastest way to minimize the cost is to repay the cash advance as soon as possible. Every day the balance sits on your card, interest accrues at the higher cash advance rate. If you can repay it within a week or two, the interest cost stays low.
When you make a payment to your credit card, the issuer applies it to your balances in a set order: usually minimum payments go to the lowest-interest debt first, but extra payments (anything above the minimum) often go to the highest-interest debt first. Check your card issuer's payment allocation policy to confirm. If extra payments go to the cash advance, paying $100 extra per month will eliminate the advance much faster than paying only the minimum.
If you cannot repay the advance quickly, consider whether you should have taken it at all. The interest and fees add up fast, and carrying a cash advance balance long-term is expensive compared to other borrowing options.
When a cash advance makes sense
A cash advance is rarely the best choice, but there are narrow situations where it might be the only option. If you need cash urgently and have no access to a personal loan, a line of credit, or a balance transfer card, a cash advance can get you money within hours. If the amount is small and you can repay it within days, the total cost may be acceptable.
A cash advance also makes sense if your credit score is too low to may have access to for other borrowing. A personal loan or balance transfer card requires a credit check and approval, which takes time and may be denied. A cash advance requires only a credit card in your name, so it is available even with poor credit.
But if you have time to explore other options — a personal loan, a 0 percent balance transfer card, borrowing from family, or a credit union loan — those will almost always cost less than a cash advance.
Frequently Asked Questions
Can I take a cash advance if I have reached my credit limit?
No. A cash advance is drawn from your available credit, so you can only withdraw up to your remaining available balance. If you have maxed out your card, you cannot take a cash advance unless you pay down the balance first.
What happens if I do not pay back the cash advance?
The balance stays on your card and continues to accrue interest at the cash advance rate. After 30 days of non-payment, the late payment appears on your credit report and damages your score. After 180 days, the account may be charged off and sent to a collection agency. The issuer can also sue you for the debt.
Is there a limit to how much I can withdraw as a cash advance?
Yes. Most card issuers set a cash advance limit, which is often lower than your full credit limit — sometimes 20 to 50 percent of your credit line. Check your card's terms or call customer service to find out your specific limit.
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 and interest rate on money used to pay another card's balance. A balance transfer (moving the balance directly from one card to another) is cheaper because it avoids the cash advance fee and often comes with a promotional 0 percent rate.
Does taking a cash advance hurt my credit score?
It can. A cash advance increases your credit utilization ratio when ready, which can lower your score by a few points. The impact is temporary and reverses as you pay down the balance. However, if the cash advance causes you to miss payments or carry the balance long-term, the damage to your score will be more serious.