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 instead of your debit account. You go to an ATM, bank branch, or convenience store, insert your card, and withdraw money just as you would from a checking account — except the money comes from your credit card balance, not your bank account. The issuer treats this as a loan that you repay through your monthly credit card bill.

A cash advance is different from a regular purchase. When you buy something with your card, the merchant charges the purchase to your account and the issuer pays them. With a cash advance, you are the merchant — you are taking the money yourself, and the issuer when ready charges you interest and fees. This makes cash advances one of the most expensive ways to borrow money on a credit card.

Key Takeaways

  • Cash advances charge interest from the moment you withdraw the money, with no grace period like regular purchases have.
  • Most card issuers charge an upfront fee of 3 to 5 percent of the amount you withdraw, on top of the interest rate.
  • The interest rate on a cash advance is usually higher than the rate on regular purchases, often 20 to 30 percent or more.
  • You can take a cash advance at an ATM, bank branch, or convenience store using your PIN or by asking a teller for the cash.
  • The amount you can withdraw is limited by your cash advance limit, which is usually much lower than your total credit limit.

How much a cash advance actually costs

The cost of a cash advance has two parts: the upfront fee and the interest. The upfront fee is charged the moment you withdraw the money. Most issuers charge between 3 and 5 percent of the amount you take out, though some charge a flat fee instead (usually $5 to $10). A $300 cash advance with a 4 percent fee costs $12 when ready.

Interest starts accruing right away — there is no grace period. If your card charges 25 percent annual interest on cash advances, that is roughly 2 percent per month. On a $300 advance, you pay about $6 in interest the first month alone, whether or not you have paid any of it back. The longer you carry the balance, the more interest compounds.

Because the interest rate on cash advances is usually higher than the rate on regular purchases, paying back a cash advance should be your first priority. If you owe $300 on a purchase at 18 percent and $300 on a cash advance at 28 percent, your monthly payment will reduce the cash advance balance first (because it costs more), but you should still try to pay down the cash advance faster.

Where you can get a cash advance

ATMs are the most common place. You insert your card, enter your PIN, and withdraw cash up to your daily limit. Most ATMs charge a fee on top of your card issuer's fee — usually $2 to $3 per transaction. If you use an out-of-network ATM (one that does not belong to your card's bank), the fee is often higher.

Bank branches let you ask a teller for a cash advance. You show your card and ID, and they withdraw the money from your account. Bank branches do not usually charge an ATM fee, only your issuer's cash advance fee. This is often cheaper than using an ATM if you have a choice.

Convenience stores and supermarkets sometimes offer cash advances at the checkout. You hand over your card, and the cashier processes it like a debit card withdrawal. These locations usually charge an ATM-style fee on top of your issuer's fee.

Your cash advance limit and how it works

Your card issuer sets a separate cash advance limit that is usually much lower than your total credit limit. If your credit limit is $5,000, your cash advance limit might be $1,000 or $1,500. This limit protects the issuer from large cash advances and protects you from borrowing more cash than you can repay.

You can find your cash advance limit in your cardholder agreement or by calling the issuer's customer service number on the back of your card. Some issuers let you request a higher limit, though they may charge a fee or require a credit check. Taking a cash advance counts against your total credit limit — if you withdraw $500, your available credit drops by $500.

Why cash advances are expensive compared to other borrowing

A cash advance is almost always more expensive than a regular credit card purchase, a personal loan, or a line of credit. The combination of an upfront fee, a higher interest rate, and no grace period makes it one of the costliest ways to borrow money.

If you need cash, explore other options first. A personal loan from a bank or credit union usually charges 8 to 15 percent interest with no upfront fee. A balance transfer to a 0 percent introductory card (if you have good credit) costs nothing for 6 to 21 months. Even a payday loan, which is expensive, is sometimes cheaper than a cash advance if you repay it within two weeks. A cash advance makes sense only when you have no other option and need the money when ready.

How a cash advance shows up on your bill and credit report

Your cash advance appears on your monthly statement as a separate line item, distinct from your regular purchases. It shows the amount withdrawn, the fee charged, and the interest accrued. The cash advance balance is part of your total credit card balance and must be paid back through your monthly payment.

A cash advance does not hurt your credit score directly — it is not reported separately to the credit bureaus. However, it does increase your credit utilization (the percentage of your available credit that you are using), which can lower your score slightly. If you carry the cash advance balance for several months, the interest and fees will increase your total debt, which can hurt your score more over time.

How to repay a cash advance

You repay a cash advance through your regular monthly credit card payment, just like any other balance. The issuer applies your payment to the highest-interest balance first, which is usually the cash advance. If you make only the minimum payment, the cash advance will take months or years to pay off because most of your payment goes toward interest.

To pay off a cash advance quickly, make a payment larger than the minimum and specify that it should go toward the cash advance balance. Some issuers let you do this online or by phone. If you can, pay the entire cash advance in one or two payments to avoid months of interest charges.

Frequently Asked Questions

Can I use a cash advance to pay another credit card bill?

Technically yes, but it is a bad idea. You are borrowing at a high interest rate (25 to 30 percent) to pay off a balance that might be at a lower rate (15 to 20 percent). You end up paying more interest overall. A balance transfer to a 0 percent card is a better option if you have good credit.

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 or 0 percent introductory rate. A cash advance withdraws cash and charges interest when ready. Balance transfers are for moving existing debt; cash advances are for getting cash. Balance transfers are almost always cheaper if you may have access to.

Do I have to use my PIN to get a cash advance?

At an ATM, yes — you need your PIN. At a bank branch or store, you can usually ask for a cash advance without a PIN by showing your ID. The method does not change the cost; you still pay the upfront fee and interest either way.

Will a cash advance affect my credit score?

Not when ready. It does not appear as a separate item on your credit report. However, it increases your credit utilization, which can lower your score by a few points. If you carry the balance for months, the growing debt will hurt your score more significantly.

Can I get a cash advance if I have a low credit limit?

Your cash advance limit is set separately from your credit limit and is usually lower. Even with a $500 credit limit, you might have a $200 cash advance limit. Call your issuer to find out your specific cash advance limit.