A cash advance is borrowing money directly from your credit card issuer, not from an ATM or store
When you take a cash advance on a credit card, you are withdrawing cash using your credit line — the same way you would use the card to buy something, except the money goes into your pocket instead of to a merchant. You do this at an ATM, a bank branch, or sometimes through a convenience check the card issuer sends you. The card company treats it as a loan against your available credit, not as a purchase.
The catch is that cash advances cost significantly more than regular purchases. You pay an upfront fee (usually 3 to 5 percent of the amount withdrawn), a higher interest rate than your purchase APR, and interest starts accruing when ready — there is no grace period like there often is for purchases. For most people, a cash advance should be a last resort, not a routine way to get cash.
Key Takeaways
- Cash advances charge an upfront fee of 3 to 5 percent plus a higher interest rate than purchases, with no grace period.
- Interest on a cash advance begins the day you withdraw it, not at the end of your billing cycle.
- Your credit card issuer sets the cash advance limit separately from your purchase limit, and it is often much lower.
- Payments you make go toward purchases first, then cash advances, so the high-interest debt can linger while you pay off cheaper purchases.
How the fees and interest work
A cash advance fee is charged when you withdraw the money. It is typically 3 to 5 percent of the amount withdrawn, with a minimum fee (often $5 to $10). So if you take out $500, you might pay $15 to $25 just to get the cash. That fee is added to your balance when ready.
The interest rate on a cash advance is separate from your purchase APR and is almost always higher — often 5 to 10 percentage points above what you pay on purchases. If your purchase APR is 18 percent, your cash advance APR might be 25 percent or higher. This rate applies to the full amount you withdrew, including the fee.
Unlike purchases, which usually have a grace period (typically 21 days before interest starts), interest on a cash advance begins accruing the moment you withdraw it. There is no grace period. If you withdraw $500 on day one and pay it back on day 30, you will owe interest for all 30 days, not zero days.
Your cash advance limit is separate from your credit limit
Credit card issuers set a cash advance limit that is independent of your overall credit limit. If your credit limit is $5,000, your cash advance limit might be only $1,000 or $1,500. You cannot exceed this limit, even if you have unused purchase credit available.
The issuer determines this limit based on your credit history and account activity. You can call the card issuer to ask what your cash advance limit is, and sometimes you can request an increase, though approval is not may provide. Some cards do not allow cash advances at all.
How payments are applied when you have both purchases and cash advances
If you carry a balance that includes both purchases and a cash advance, your payments go toward the purchase balance first, then to the cash advance. This means the high-interest cash advance debt sits on your account longer while you pay down the cheaper purchase debt. If you owe $1,000 in purchases at 18 percent APR and $500 in a cash advance at 25 percent APR, and you make a $500 payment, that entire payment goes to the purchase balance, leaving the cash advance untouched.
This payment hierarchy is set by law, but it works against you. To pay off a cash advance quickly, you need to make payments large enough to cover the purchase balance first, then attack the cash advance separately. Many people do not realize this and end up paying far more interest than they expected.
Where you can take a cash advance
You can withdraw a cash advance at any ATM that displays your card's logo (Visa, Mastercard, American Express, Discover). You can also go to a bank branch — either your own bank or the card issuer's bank — and ask the teller for a cash advance. Some card issuers mail convenience checks that you can write like a regular check; these are treated as cash advances and carry the same fees and rates.
ATMs are the most common method, but they may charge an additional ATM fee on top of the cash advance fee. A bank branch usually does not charge an extra ATM fee, so that route is slightly cheaper if you have one nearby.
When a cash advance might make sense
A cash advance is rarely the right choice, but there are narrow situations where it might be the least bad option. If you need cash urgently and have no other way to get it — no savings, no friends or family to borrow from, no payday loan available — a cash advance is faster than a personal loan, which can take days to fund. If you can pay it back within a week or two, the total interest cost might be lower than waiting for a loan process.
More often, though, a personal loan, a line of credit from your bank, or even a payday loan (despite its reputation) will cost less than a cash advance. Before you use a cash advance, call your bank and ask about a personal loan rate. If you can get a personal loan at 12 percent APR instead of a 25 percent cash advance APR, the math is clear.
The impact on your credit score
Taking a cash advance does not directly hurt your credit score the way a missed payment does, but it can indirectly lower your score. A cash advance increases your credit utilization — the percentage of your available credit you are using — which is a factor in your score. If you have a $5,000 limit and a $1,000 cash advance limit, and you withdraw $500, you are using 50 percent of your cash advance limit, which signals higher risk to credit scoring models.
More importantly, if a cash advance leads you to carry a larger balance or miss payments because the debt is expensive, your score will drop. The cash advance itself is not the problem; the debt it creates is.
Frequently Asked Questions
Can I use a cash advance to pay off another credit card?
Yes, you can withdraw cash and use it to pay another card's balance. However, this is almost never a good idea because you are paying a 3 to 5 percent fee plus a 25 percent APR to move debt that might be at 18 percent APR. You would be making your situation worse. A balance transfer (moving the debt directly from one card to another) is cheaper if you may have access to.
What happens if I cannot pay back the cash advance?
The debt stays on your account and accrues interest at the cash advance rate. If you miss payments, your credit score drops and the card issuer may close your account or sue you. The debt does not disappear. Contact your card issuer when ready if you cannot pay; some offer hardship programs that lower your interest rate temporarily.
Is there a way to avoid the cash advance fee?
No. The fee is charged when you withdraw the money, and there is no way around it if you use the cash advance feature. The only way to avoid the fee is to not take a cash advance. Some cards offer no cash advance feature at all, which removes the temptation.
Do cash advances show up differently on my credit report?
Cash advances do not appear separately on your credit report — they are part of your overall credit card balance. However, if you miss payments on the cash advance, that missed payment is reported and damages your credit history.