A cash advance is when you borrow money against your credit card's line of credit, usually at an ATM or bank teller window
Unlike a purchase, where you charge something to your card and pay it back later, a cash advance puts actual dollars in your hand when ready. The card issuer treats it as a loan from day one. You start paying interest the moment you withdraw the money — there is no grace period like there is for purchases.
The cost of a cash advance is almost always higher than the cost of a regular purchase on the same card. Most cards charge a separate, higher interest rate for cash advances, plus an upfront fee. That combination makes cash advances one of the most expensive ways to borrow money on a credit card.
Key Takeaways
- Cash advances charge interest from the withdrawal date with no grace period, and the interest rate is typically 3 to 5 percentage points higher than your purchase rate.
- You pay an upfront fee — usually 3 to 5 percent of the amount withdrawn — on top of the interest charges.
- The total cost of borrowing $500 for one month can easily exceed $25 to $35 in fees and interest combined.
- Cash advances count against your available credit and can lower your credit score if they push your overall card balance higher.
How the fees and interest rates work
When you take a cash advance, your card issuer charges a cash advance fee upfront. This is a percentage of the amount you withdraw, typically between 3 and 5 percent. If you withdraw $500, you might pay $15 to $25 just to get the cash. Some cards cap the fee at a flat dollar amount — for example, $10 minimum or $100 maximum — so the percentage matters less on very large or very small withdrawals.
On top of that fee, you pay cash advance interest starting when ready. This rate is separate from your purchase APR and is almost always higher. Where your purchase rate might be 18 percent, your cash advance rate could be 23 or 25 percent. The interest accrues daily until you pay the balance off completely.
Because there is no grace period, interest starts the day you withdraw the money. With a purchase, you typically have 21 to 25 days before interest kicks in. With a cash advance, that buffer does not exist.
What happens to your credit score
A cash advance affects your credit in two ways. First, it counts as a balance on your credit card, which increases your credit utilization ratio — the percentage of your available credit you are using. If you have a $5,000 limit and take a $1,000 cash advance, your utilization jumps to 20 percent. Higher utilization can lower your credit score, even if you pay the cash advance back quickly.
Second, the cash advance shows up on your credit report as a separate type of transaction. Credit scoring models sometimes treat cash advances differently than purchases, viewing them as a riskier form of borrowing. This can have a small additional negative impact on your score.
The damage is usually temporary — your score recovers as you pay down the balance and your utilization drops. But if you carry the cash advance for months, the impact lasts longer.
Where you can get a cash advance
The most common way to take a cash advance is at an ATM using your credit card. You insert the card, enter your PIN, and withdraw cash just as you would with a debit card. The ATM operator may charge an additional fee — typically $2 to $5 — on top of your card issuer's cash advance fee.
You can also get a cash advance at a bank teller window by presenting your credit card and asking for cash. Banks do not usually charge an extra fee for this service, so you only pay your card issuer's fee and interest. This is often cheaper than using an ATM, especially if the ATM operator charges a high fee.
Some credit cards allow you to transfer a cash advance to your bank account through your online portal or mobile app, though this is less common. Check your card's terms to see whether this option is available.
How to pay back a cash advance
Your cash advance balance appears on your credit card statement as a separate line item. When you make a payment to your card, the payment typically goes toward your lowest-interest balance first — usually your purchases — before it touches the cash advance. This means if you have both a purchase balance and a cash advance balance, paying your minimum payment will not pay down the cash advance as quickly as you might expect.
To pay off a cash advance faster, you can request that your payment go directly to the cash advance balance. Call your card issuer or check your online account to see if you can direct payments to specific balance types. Otherwise, you may need to pay more than the minimum to make a dent in the cash advance itself.
The longer you carry the cash advance, the more interest you pay. A $500 cash advance at 25 percent interest costs roughly $10 per month in interest alone, plus the upfront fee you already paid. Over six months, that $500 withdrawal could cost you $60 to $80 in fees and interest.
When a cash advance might make sense
A cash advance is rarely the best borrowing option, but there are narrow situations where it might be the least bad choice. If you need cash urgently and have no other way to get it — no savings, no access to a personal loan, no friends or family who can help — a short-term cash advance might be better than missing a critical payment or going without necessities.
The key is to treat it as a true emergency measure and pay it back as fast as possible. If you can pay off the cash advance within a week or two, the total cost stays manageable. If you are considering carrying it for months, look for alternatives first: a personal loan from a bank or credit union, a payment plan with a creditor, or a temporary increase in your income.
Alternatives to a cash advance
A personal loan from a bank or credit union almost always costs less than a cash advance. Personal loan rates are typically lower, and you pay no upfront fee. The loan is also a fixed amount with a set repayment schedule, so you know exactly what you owe and when.
A payday loan is another option, though it is also expensive. Payday loans charge high fees and interest, but the term is short — usually two weeks — so the total cost may be lower than a cash advance you carry for months. However, payday loans can trap you in a cycle of borrowing, so use this option only if you are certain you can repay it on your next paycheck.
If you need cash for an unexpected expense, asking for a payment plan from the creditor is often free. Many utilities, medical offices, and service providers will let you split a bill into installments with no interest or fee. This costs nothing and gives you time to find the money.
Frequently Asked Questions
Can I use a cash advance to pay off other debts?
Technically yes, but it is usually a bad idea. You are borrowing at a high interest rate with an upfront fee just to pay off another debt. Unless the other debt has an even higher interest rate — which is rare — you are making your situation more expensive. A personal loan or balance transfer card would be cheaper options.
What is the difference between a cash advance and a balance transfer?
A balance transfer moves debt from one card to another, usually at a lower interest rate for an introductory period. A cash advance puts cash in your hand when ready at a high interest rate with no introductory period. Balance transfers are for moving existing debt; cash advances are for getting cash now.
Does a cash advance affect my credit limit?
Yes. The cash advance counts against your available credit, so it reduces the amount you can spend on purchases. If you have a $5,000 limit and take a $1,000 cash advance, you have $4,000 left to spend. Once you pay off the cash advance, that credit becomes available again.
Can I avoid the cash advance fee?
No. Every credit card charges a cash advance fee, and it is non-negotiable. You cannot waive it or negotiate it down. The only way to avoid it is to not take a cash advance. Some cards have lower fees than others, so if you know you will need cash occasionally, comparing cash advance fees when choosing a card can save you money over time.
What happens if I only pay the minimum on a cash advance?
The balance will shrink very slowly because most of your minimum payment goes toward interest, not principal. A $500 cash advance at 25 percent interest could take a year or more to pay off if you only make minimum payments, and you would pay $100 or more in interest alone. Paying more than the minimum is essential to keep costs down.