A cash advance is when you borrow money against your credit card's available credit, usually at an ATM or through your bank
You walk to an ATM, insert your credit card, enter your PIN, and withdraw cash. That cash is not drawn from a checking account — it comes from your credit card issuer as a loan. The moment you take it out, you owe it back, and the card company charges you fees and interest that are usually much higher than what you pay on regular purchases.
Cash advances are different from balance transfers (moving debt from one card to another) and different from using your debit card at an ATM. With a cash advance, you are borrowing new money on credit, not accessing money you already have. The card issuer treats it as a separate transaction type, which is why the costs are steeper.
Key Takeaways
- Cash advances charge an upfront fee (usually 3 to 5 percent of the amount withdrawn) plus a higher interest rate than regular purchases, often 20 to 30 percent APR.
- Interest on a cash advance starts accruing when ready — there is no grace period like there is for purchases.
- You can withdraw cash at ATMs, bank teller windows, or sometimes through convenience checks your card issuer sends you.
- Your credit card's cash advance limit is often lower than your overall credit limit, so you may not be able to withdraw as much as you can spend.
- Paying off a cash advance should be your first priority because the interest compounds quickly and the fee is non-refundable.
The fees and interest rates that make cash advances expensive
When you take out a cash advance, you pay two costs when ready: a cash advance fee and interest. The fee is charged upfront and is usually between 3 and 5 percent of the amount you withdraw. If you take out $500, you might pay $15 to $25 just to get the cash. That fee does not come back, even if you repay the advance quickly.
The interest rate on a cash advance is separate from your regular purchase APR and is almost always higher. While a card might charge 18 percent APR on purchases, the cash advance APR could be 25 or 30 percent. Unlike purchases, which often have a grace period (usually 21 days) before interest kicks in, cash advance interest starts the day you withdraw the money. There is no waiting period.
Because interest compounds daily, the longer you carry a cash advance, the more you owe. A $500 advance at 28 percent APR costs roughly $3.89 per day in interest alone. After 30 days, you owe the original $500 plus the $15 to $25 fee plus about $117 in interest — nearly $650 total.
Where you can get a cash advance
Most credit card issuers let you withdraw cash at any ATM that displays their network logo (Visa, Mastercard, American Express, or Discover). You insert your card, enter your PIN, and withdraw up to your cash advance limit. Some ATMs charge an additional fee of $2 to $5 on top of your card issuer's fee, so you may pay $20 to $30 just to access $500.
You can also get a cash advance at a bank teller window by asking to withdraw cash against your credit card. This method does not usually charge an ATM operator fee, but you still pay your card issuer's cash advance fee and interest. Some card issuers also send convenience checks — checks you can write against your credit line. Writing one of these checks counts as a cash advance and triggers the same fees and interest rate.
Your card issuer sets a separate cash advance limit, which is often much lower than your overall credit limit. If your card has a $5,000 limit, your cash advance limit might be only $1,000. Check your card's terms or call the issuer to find out what you can withdraw before you go to an ATM.
How a cash advance affects your credit and your card balance
A cash advance shows up on your credit card statement as a separate line item from your regular purchases. It counts toward your overall credit utilization — 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, which can lower your credit score slightly.
When you make a payment to your credit card, the card issuer applies it to your lowest-interest debt first. That means if you have both a cash advance (at 28 percent APR) and regular purchases (at 18 percent APR), your payment goes toward the purchases first, and the cash advance keeps accruing interest at the higher rate. This is why paying off a cash advance as quickly as possible is critical — the interest will otherwise compound while your regular purchases get paid down.
Some card issuers let you specify where your payment goes, so you can direct money straight to the cash advance. Call your issuer or log into your online account to see if this option is available. If it is, use it.
When a cash advance might make sense (and when it does not)
A cash advance is rarely the right choice for everyday spending. The fees and interest are too high. However, there are narrow situations where it might be the least-bad option: you need cash when ready for an emergency (a car repair, a medical bill), you have no other way to get the money, and you can pay it back within a few days or weeks.
Even then, consider alternatives first. A personal loan from a bank or credit union usually has a lower interest rate and no upfront fee. A payday loan is predatory but sometimes cheaper than a cash advance if you repay it in two weeks. Asking family or friends, selling something you own, or using a payment plan with the person or business you owe money to are all better options than a cash advance.
Do not use a cash advance for regular bills, groceries, or anything you would normally put on the card. The interest will cost you far more than the item is worth, and you will end up carrying the debt for months.
How to pay off a cash advance quickly
The moment you take out a cash advance, make a plan to repay it. Every day you carry it, the interest grows. If you took out $500 and paid it back within a week, you might owe $525 to $535 total. If you carry it for three months, you could owe $650 or more.
Set up a payment as soon as you can — ideally within days, not weeks. Log into your card's online portal or call the issuer and make a payment above your minimum. If your issuer lets you direct payments to the cash advance specifically, do that. Otherwise, pay as much as you can afford and make it your priority over other card balances.
If you cannot pay it off quickly, stop using the card for new purchases until the cash advance is gone. Every new purchase will be paid down before the cash advance, which means the advance keeps accruing interest while you chip away at lower-interest debt.
Frequently Asked Questions
Can I use a cash advance to pay another credit card bill?
Technically yes, but it is a bad idea. You would pay the cash advance fee and high interest rate on money you are using to pay another card's balance. You would be paying fees and interest on both cards instead of just one. It is almost always better to make a regular payment to the other card or contact that issuer about a hardship plan.
What happens if I only pay the minimum on a cash advance?
The minimum payment covers only a small portion of the interest and almost none of the principal. A $500 cash advance at 28 percent APR with a minimum payment of $25 per month would take you over two years to pay off and cost you roughly $150 in interest alone. Pay as much as you can afford each month to avoid this trap.
Is there a way to avoid the cash advance fee?
Not if you use your credit card to withdraw cash. Some cards marketed to people with poor credit offer no cash advance fee, but they charge higher interest rates to make up for it. The best way to avoid the fee is to not take a cash advance at all — use your debit card, borrow from a bank, or find another source of cash.
Does a cash advance hurt my credit score?
It can, because it increases your credit utilization. However, the bigger damage comes from carrying the balance long-term. If you pay it off within a month or two, the impact is usually small. If you carry it for months, the high utilization and the account activity will lower your score more noticeably.
Can I get a cash advance if my card is maxed out?
No. Your cash advance limit is part of your overall credit limit. If you have used your full limit, you cannot take a cash advance. You would need to pay down your balance first or request a credit limit increase from your issuer.