What a cash advance is and why it costs more
A cash advance is when you use your credit card to withdraw cash from an ATM or bank teller, rather than making a purchase. The money goes into your pocket or account, not toward a merchant. It feels like information programs for a moment — and then the fees and interest hit.
A cash advance is not the same as a regular purchase. Your credit card company charges you a separate fee (usually 3 to 5 percent of the amount withdrawn, with a minimum of $5 to $10) just to take the cash out. On top of that, interest starts accruing when ready — there is no grace period like there is for regular purchases. If you charge $500 and pay it back in 30 days, you will owe the cash advance fee plus a month of interest at a rate that is often 5 to 10 percentage points higher than your regular purchase rate.
The math works against you fast. A $500 cash advance at a 4 percent fee ($20) plus 25 percent annual interest costs you roughly $30 to $35 in the first month alone, even if you pay it back when ready.
Key Takeaways
- Cash advances charge a separate upfront fee (typically 3 to 5 percent) plus interest that starts the same day, with no grace period.
- The interest rate on a cash advance is usually 5 to 10 percentage points higher than your regular purchase rate.
- You can withdraw cash at an ATM using your credit card PIN, or visit a bank teller and ask for a cash advance.
- If you need cash urgently, a personal loan, credit union loan, or even a payday loan may cost less than a credit card cash advance.
- Payments toward a cash advance are applied last, after purchases, so carrying a balance makes the debt harder to pay down.
How to physically take out a cash advance
The mechanics are straightforward. Find an ATM that accepts your card — most do, though some charge an additional ATM operator fee on top of your credit card company's fee. Insert your card, enter your PIN (the same one you use for debit), select "cash advance" or "withdraw cash," and choose the amount. The ATM will dispense the cash and charge your credit card account.
If you prefer not to use an ATM, you can walk into any bank branch and ask the teller for a cash advance on your credit card. Bring your card and a photo ID. The teller will process it the same way — they charge the fee, the cash goes to you, and the balance appears on your next statement.
There is no approval process. Unlike a loan, the credit card company does not decide whether to give you the cash. If you have available credit, you can take it out. The only limit is your credit limit minus any balance you already carry.
The fees and interest you will pay
Your credit card statement or online account shows three separate numbers for cash advances: the fee, the interest rate, and sometimes a separate daily periodic rate. Read your cardholder agreement to find these exact figures — they vary by card and by issuer.
The cash advance fee is charged once, upfront. A $300 withdrawal at 4 percent costs $12 when ready. A $300 withdrawal at 5 percent costs $15. Some cards cap the fee at a maximum (say, $10 on a $200 withdrawal), so a very small advance might cost less percentage-wise.
Interest begins accruing the day you take the cash out — not 21 days later, not when your statement closes. If your regular purchase APR is 18 percent, your cash advance APR might be 23 or 25 percent. That higher rate applies only to the cash advance balance, not to regular purchases, but only until the cash advance is paid off.
If you carry a balance on your card, payments go toward purchases first, then cash advances last. This means if you owe $500 in purchases and $300 in a cash advance, and you send in $400, the full $400 goes to the purchases. The cash advance keeps accruing interest at the higher rate while you pay down the cheaper debt first.
When a cash advance makes sense (and when it does not)
A cash advance makes sense only when you have no other option and the amount is small. If you need $50 for an emergency and you have no other way to get it, a $2 fee and a few days of interest is better than overdrawing your account or missing a bill. But this is the exception, not the rule.
A cash advance does not make sense if you are considering it for regular spending, to pay bills, or to cover a shortfall you expect to carry for weeks or months. The fees and interest will compound, and you will end up paying back significantly more than you borrowed.
If you need cash regularly, the problem is not your credit card — it is your cash flow. A cash advance is a symptom that something else is broken. Before taking one out, ask yourself: Am I short on cash this month, or am I short every month? If it is every month, a cash advance will make the problem worse, not better.
Cheaper alternatives to a cash advance
A personal loan from a bank or credit union usually has a lower interest rate than a cash advance, even if your credit is not perfect. Rates vary, but a personal loan might run 10 to 20 percent APR, compared to 23 to 30 percent for a cash advance. The loan also has a fixed term — you know exactly when it will be paid off — and no daily interest accrual.
A credit union loan is often cheaper still. Credit unions are member-owned and typically offer lower rates than banks. If you belong to one, call and ask about a small personal loan or a line of credit. Some credit unions offer emergency loans at rates capped by law.
A payday loan is a short-term loan (usually two weeks) that you repay from your next paycheck. The fees are high — typically $15 to $20 per $100 borrowed — but if you repay it in two weeks, the total cost is often less than a cash advance you carry for a month. Payday loans are regulated by state, so rates and terms vary. Use one only if you can repay it on schedule.
A balance transfer to a card with a 0 percent introductory rate is another option if you have time to plan. Some cards offer 0 percent APR for 6 to 21 months on transferred balances, though they charge a transfer fee (usually 3 to 5 percent). This does not help you get cash in hand, but if you already have a cash advance balance, transferring it to a 0 percent card stops the interest clock.
How a cash advance affects your credit score
Taking a cash advance does not directly hurt your credit score the way a late payment does. The transaction itself does not appear on your credit report. However, a cash advance increases your credit utilization — the percentage of your available credit you are using. If you have a $5,000 limit and take out a $1,000 cash advance, your utilization jumps to 20 percent. High utilization can lower your score by 10 to 50 points, depending on your current score and how much you are using.
The damage is temporary. Once you pay off the cash advance, your utilization drops and your score recovers. But while you carry the balance, the score hit remains. If you are planning to explore for a mortgage, car loan, or other credit in the next few months, a cash advance will make your score worse at exactly the wrong time.
How to pay off a cash advance faster
If you have already taken a cash advance, the goal is to pay it off as quickly as possible. Make a payment larger than your minimum, and specify that it should go toward the cash advance balance, not your purchases. Some card issuers let you do this online or by phone; others require a written request.
Paying the minimum will take years and cost thousands in interest. A $500 cash advance at 25 percent APR with a $25 minimum payment takes 27 months to pay off and costs $175 in interest alone — on top of the original fee. If you can pay $150 a month instead, it is gone in four months with $40 in interest.
If you cannot pay it off quickly, consider a balance transfer or personal loan to move the debt somewhere cheaper. The transfer fee or loan origination fee is usually less than the interest you will pay if you leave it on the credit card.
Frequently Asked Questions
Can I use a credit card cash advance to pay off another debt?
Technically yes, but it is almost always a bad idea. You are replacing one debt with a more expensive one. The cash advance fee and higher interest rate mean you will pay back more than you borrowed. A personal loan or balance transfer is cheaper.
What is the difference between a cash advance and a balance transfer?
A cash advance gives you physical cash and charges you a fee plus high interest when ready. A balance transfer moves debt from one card to another and may offer a 0 percent introductory rate. Balance transfers are for existing debt; cash advances are for getting cash in hand.
Does taking a cash advance hurt my credit score?
Not directly, but it increases your credit utilization, which can lower your score by 10 to 50 points. The damage is temporary — once you pay it off, your score recovers. But the hit happens right away, which matters if you are explore for other credit soon.
Can I take a cash advance if I have a zero balance?
Yes. As long as you have available credit, you can take a cash advance. The fee and interest explore the same way, regardless of whether you carry a balance on purchases.
What happens if I only make the minimum payment on a cash advance?
The balance grows slowly because interest accrues daily. A $500 cash advance at 25 percent APR with a $25 minimum payment takes 27 months to pay off and costs $175 in interest. Paying more than the minimum is essential to avoid years of debt.