A cash advance is when you borrow money against your credit card's credit line at an ATM or bank, not by making a purchase
When you use a credit card at a store, the card company pays the merchant and you pay the card company back later. A cash advance works differently: you withdraw actual cash from your credit card account, and the card company charges you fees and interest when ready — often much higher than the interest on regular purchases.
The cash goes into your pocket or bank account right away. You owe it back to the card company just like any other balance, but the cost of borrowing that money is steeper from the first day. Most people use cash advances when they need money urgently and have no other option, but the fees and interest rates make them one of the most expensive ways to borrow on a credit card.
Key Takeaways
- A cash advance charges a separate, higher interest rate than purchases — often 20% to 30% annually — with no grace period, so interest starts accruing when ready.
- You pay an upfront fee, usually 3% to 5% of the amount withdrawn, on top of the interest charges.
- Cash advances are processed differently than purchases and count against a separate part of your credit limit, which may be lower than your total limit.
- The total cost of a small cash advance can exceed the cost of a payday loan or personal loan from a bank, making it worth comparing other options first.
How the fees and interest work
When you take a cash advance, you pay two costs upfront: a cash advance fee and cash advance interest. The fee is usually 3% to 5% of the amount you withdraw — so a $500 cash advance costs $15 to $25 just to get the money. Some cards charge a flat fee instead, like $5 or $10, which is better if you're withdrawing a large amount but worse if you're withdrawing a small amount.
The interest rate on cash advances is separate from your purchase rate and is almost always higher. While a credit card purchase might carry 15% to 20% annual interest, a cash advance often runs 20% to 30% or more. Unlike purchases, there is no grace period — interest starts accruing the day you withdraw the cash, not at the end of your billing cycle. If you carry the balance for a month, you're paying roughly 1.7% to 2.5% of the amount borrowed in interest alone, plus you already paid the upfront fee.
Where you can get a cash advance
You can withdraw a cash advance at an ATM using your credit card, at a bank teller window, or sometimes at a convenience store or casino cage. The ATM is the most common method. You'll need your PIN, which you set up when you opened the card or can request from your card company.
Each card company sets a cash advance limit, which is usually lower than your total credit limit. You might have a $5,000 credit limit but only a $1,500 cash advance limit. This limit is separate from your purchase limit, so withdrawing $1,000 in cash doesn't reduce the $5,000 available for purchases — but it does count toward your total credit utilization, which affects your credit score.
Why cash advances are expensive compared to other borrowing
A cash advance looks fast and straightforward, but the total cost often exceeds what you'd pay with other borrowing methods. Say you need $500 for an emergency. With a credit card cash advance at 5% fee plus 25% annual interest held for one month, you'd pay $25 upfront plus roughly $10 in interest — $35 total. A payday loan might charge $15 per $100 borrowed, which is $75 for $500, but you'd pay it back in two weeks instead of carrying it for a month. A personal loan from a bank or credit union might charge 10% to 15% annual interest with no upfront fee, costing you $4 to $6 in interest for one month.
The math changes based on how long you carry the balance. If you pay off the cash advance within a few days, the interest cost is small and the upfront fee is your main expense. But if you carry it for months, the interest compounds and the cash advance becomes one of the most expensive ways to borrow. Before you take a cash advance, call your bank or credit union and ask about a personal loan, or research whether a payday loan (despite its bad reputation) would actually cost less for your specific situation.
How a cash advance affects your credit score
Taking a cash advance doesn't hurt your credit score directly — the card company doesn't report it as a negative event. But it does increase your credit utilization, which is the percentage of your available credit you're using. If you have a $5,000 credit limit and you take a $1,000 cash advance, your utilization jumps to 20%, and credit scoring models treat higher utilization as riskier. This can lower your score by a few points in the short term.
The bigger risk is if you can't pay the cash advance back quickly. Carrying a high balance on your credit card — whether from purchases or cash advances — keeps your utilization high and can lower your score by 50 to 100 points or more. If you miss a payment, the damage is much worse. The cash advance itself doesn't show up separately on your credit report; it's just part of your credit card balance.
When a cash advance might make sense
Cash advances are rarely the best choice, but there are narrow situations where they're worth considering. If you have a true emergency and no other way to get cash — your car breaks down and you need a repair today, or you're traveling and your debit card stops working — a cash advance might be faster than waiting for a personal loan or asking family for help. The key is paying it back as quickly as possible, ideally within days rather than weeks.
If you're considering a cash advance, first check whether your card offers a 0% introductory rate on cash advances (rare, but some do). Second, confirm your cash advance limit and fee before you go to the ATM — you don't want surprises. Third, have a concrete plan to pay it back, not just a hope that you'll have the money later. If you can't pay it back within a week or two, the interest will start eating into your budget and a different borrowing method will likely cost less.
Frequently Asked Questions
Can I use a credit card cash advance to pay another credit card bill?
Technically yes, but it's almost never a good idea. You're borrowing at 25% to 30% interest with an upfront fee to pay off a balance that might be at 15% to 20% interest. You're paying more to move the debt around, not to reduce it. The only exception is if the card you're paying off has a much higher interest rate and you have a concrete plan to pay off the cash advance quickly.
What's the difference between a cash advance and a balance transfer?
A balance transfer moves debt from one card to another, usually with a lower introductory rate. A cash advance gives you cash in hand, not a transfer of existing debt. Balance transfers are sometimes worth considering if you have high-interest debt; cash advances almost never are because the interest rate is so high and the fees are when ready.
Does taking a cash advance hurt my credit score right away?
Not when ready, but it increases your credit utilization, which can lower your score by a few points within days. The real damage happens if you carry the balance for months or miss a payment. Paying it back quickly keeps the score impact minimal.
Can I get a cash advance if I'm close to my credit limit?
Your cash advance limit is separate from your purchase limit, so you might be able to take a cash advance even if your purchase limit is maxed out. But taking a cash advance still counts toward your total credit utilization, which affects your score. Check with your card company to confirm your cash advance limit before you try to withdraw.
What happens if I can't pay back the cash advance?
It becomes part of your credit card balance and you owe interest on it every month until you pay it off. If you miss a payment, the card company will charge a late fee and report the missed payment to the credit bureaus, which can lower your score significantly. Contact your card company as soon as you know you'll have trouble paying — they may offer a hardship plan or lower interest rate.