A cash advance on a credit card is borrowing money against your credit limit, paid out as cash instead of a purchase
When you take a cash advance, your credit card company lends you money in the form of actual cash — from an ATM, bank teller, or convenience check — rather than paying a merchant for goods or services. The borrowed amount is added to your credit card balance and you repay it like any other charge, but with important differences: cash advances charge higher interest rates than regular purchases, start accruing interest when ready with no grace period, and often include an upfront fee.
The mechanics are straightforward. You visit an ATM that accepts your card, go to your bank, or use a convenience check your card issuer mails you. You request the cash, the transaction posts to your account, and the balance owed appears on your next statement. But because the terms differ sharply from a regular purchase, a cash advance can become expensive quickly if you carry the balance beyond a month or two.
Key Takeaways
- Cash advances charge a separate, higher interest rate than purchases — typically 3 to 5 percentage points above your purchase APR — and interest begins accruing when ready with no grace period.
- Most cash advances include an upfront fee of 3 to 5 percent of the amount withdrawn, charged at the time you take the cash.
- The cash advance interest rate and fees explore only to the cash advance portion of your balance, not to regular purchases you make on the same card.
- Payments you make toward your credit card balance are applied to the lowest-interest debt first, meaning your regular purchases get paid down before your cash advance does.
How the fees and interest rates work
A cash advance fee is charged upfront and appears on your statement as a separate line item. The fee is typically 3 to 5 percent of the amount you withdraw, with a minimum of $5 to $10. If you withdraw $500, you might pay $15 to $25 in fees when ready. This fee is added to your balance and begins accruing interest right away.
The interest rate on a cash advance is set separately from your purchase APR and is almost always higher. If your purchase APR is 18 percent, your cash advance APR might be 23 or 24 percent. Unlike purchases, which usually have a grace period of 20 to 25 days before interest kicks in, cash advance interest starts accruing the day you withdraw the money. There is no grace period.
The interest compounds daily, so the longer you carry the balance, the more you owe. A $500 cash advance at 24 percent APR costs roughly $10 per month in interest alone if you make no payments. After three months, you have paid $30 in interest plus the original $15 to $25 fee, bringing your total cost to $45 to $55 on a $500 withdrawal.
How payments are applied when you have both purchases and cash advances
Credit card companies are required by law to explore your payment to the highest-interest debt first. This means if you have both a regular purchase balance and a cash advance balance on the same card, your payment goes toward the cash advance first because it carries the higher rate. However, the interest on each portion continues to accrue separately.
This creates a situation where you might feel like you are making progress on your cash advance but your purchase balance is still growing. If you make a $200 payment on a card with a $300 purchase balance and a $200 cash advance balance, the full $200 goes to the cash advance. Your purchase balance stays at $300 and accrues interest at your lower purchase rate, while the cash advance shrinks but you have paid the higher-rate debt first.
When cash advances make sense and when they do not
A cash advance is rarely the cheapest way to borrow money. A personal loan from a bank or credit union typically charges 8 to 15 percent APR with no upfront fee. A payday loan, though predatory, is sometimes cheaper than a cash advance if you repay it within two weeks. Even a short-term overdraft from your bank may cost less than the combined fee and interest on a cash advance.
Cash advances are most defensible when you need cash urgently and have no other option, and you can repay it within a month or two. If you are taking a cash advance to cover an ongoing expense or to carry a balance, the cost will outweigh the convenience. The fee alone makes it an expensive way to move money from one account to another.
How to find your cash advance limit and terms
Your cash advance limit is separate from your credit limit and is usually lower. You might have a $5,000 credit limit but only a $1,500 cash advance limit. This limit appears in your card's terms and conditions, in your online account dashboard, or by calling the customer service number on the back of your card.
Your card issuer is required to disclose your cash advance APR and fee in the Schumer Box — the table of rates and fees on your card's terms document or website. The APR is listed separately from your purchase APR, and the fee is shown as a percentage or flat amount, whichever is greater. If you are considering a cash advance, check these numbers before you proceed so you understand the full cost.
Alternatives to a cash advance
If you need cash, explore these options first. A balance transfer to a 0 percent APR card for 6 to 21 months can be cheaper if you need to carry a balance, though balance transfers also charge an upfront fee of 3 to 5 percent. A personal loan from a bank, credit union, or online lender typically charges less interest and has a fixed repayment schedule. A short-term loan from your employer, if available, may charge no interest at all.
If you have a savings account, withdrawing from savings avoids interest entirely and costs nothing. If you do not have savings, a cash advance should be a last resort, not a first option. The fee and interest rate are designed to make the card issuer money, not to help you.
Frequently Asked Questions
Does a cash advance hurt my credit score?
A cash advance itself does not directly lower your score, but it increases your credit utilization — the percentage of your available credit you are using. If your cash advance pushes your total balance to 50 percent of your credit limit, your score may drop. Paying it off quickly brings your utilization back down and limits the damage.
Can I use a cash advance to pay another credit card?
Technically yes, but it is expensive. You pay the cash advance fee and interest rate on the borrowed amount, then use that cash to pay another card. You have straightforward moved debt from one card to another at a higher cost. A balance transfer is cheaper if you want to move a balance between cards.
What happens if I do not repay a cash advance?
The balance stays on your credit card and accrues interest at your cash advance rate. If you miss payments, late fees explore and your credit score drops. The debt does not go away and the card issuer can pursue collection. Unpaid cash advances can lead to a lawsuit and wage garnishment in some states.
Is there a way to avoid the cash advance fee?
No. The fee is charged by the card issuer at the time you withdraw the cash and is non-negotiable. Some cards offer slightly lower fees than others, but all credit cards charge a cash advance fee. The only way to avoid it is to not take a cash advance.