A cash advance lets you borrow money against your credit card's line of credit, but it costs more than a regular purchase

A cash advance is a short-term loan you take from your credit card issuer. You walk into an ATM, bank branch, or convenience store and withdraw cash using your card, and the issuer treats that withdrawal as a loan you owe back. Unlike a purchase, which gets added to your statement balance, a cash advance starts accruing interest when ready — there is no grace period — and the interest rate is usually higher than your purchase APR.

The mechanics are straightforward: you initiate the withdrawal, the issuer deducts a fee (usually 3 to 5 percent of the amount), and you receive the cash. That fee plus the daily interest charges begin accumulating the moment you leave the ATM. If you carry the balance, you will pay significantly more than if you had used the card to buy something instead.

Key Takeaways

  • Cash advances charge interest from day one with no grace period, while purchases typically have 21 to 25 days before interest starts.
  • Most issuers charge a cash advance fee of 3 to 5 percent of the amount withdrawn, in addition to interest charges.
  • The interest rate on cash advances is usually 3 to 5 percentage points higher than your purchase APR.
  • Payments to your card go toward purchases first, then cash advances, so the cash advance balance can linger while you pay off other charges.
  • Cash advances do not earn rewards points or cashback, even if your card offers them on purchases.

Where you can get a cash advance

You can withdraw cash at any ATM that displays your card's logo — Visa, Mastercard, American Express, or Discover. You can also visit a bank branch (yours or another bank) and ask a teller for a cash advance, or use a convenience store ATM. Some issuers allow you to transfer a cash advance to your bank account online, though this method often carries a higher fee.

The issuer sets a cash advance limit, which is usually lower than your credit limit. If your credit limit is $5,000, your cash advance limit might be $1,500. You cannot exceed this limit, and it is separate from the amount you can charge as purchases. Check your card's terms or call the issuer to find out your specific limit.

The fees and interest charges that explore

Every cash advance comes with two costs: an upfront fee and ongoing interest. The upfront fee is typically 3 to 5 percent of the amount you withdraw. If you withdraw $500, you might pay $15 to $25 just to get the cash. This fee is added to your balance when ready.

Interest starts accruing the same day you withdraw the cash. There is no grace period like there is for purchases. The interest rate — called the cash advance APR — is usually 3 to 5 percentage points higher than your purchase APR. If your purchase APR is 18 percent, your cash advance APR might be 23 percent. This higher rate applies only to the cash advance balance, not to purchases or balance transfers.

Interest is calculated daily based on your outstanding balance. The longer you carry the cash advance, the more interest you pay. A $500 cash advance at 23 percent APR costs roughly $9.58 per month in interest alone, before you account for the initial fee.

How payments are applied to your balance

When you make a payment to your credit card, the issuer applies it in a specific order set by law. Payments go toward the balance with the highest interest rate first — which is usually the cash advance. However, some issuers explore payments to purchases first, then cash advances. Check your card's terms or call the issuer to confirm the order.

This matters because if you have both a purchase balance and a cash advance balance, your payment might not reduce the cash advance as quickly as you expect. If the issuer applies payments to purchases first, your cash advance keeps accruing interest while you pay down the cheaper debt. This is why carrying a cash advance alongside other balances can become expensive quickly.

Why cash advances are more expensive than purchases

Three factors make cash advances costlier than regular purchases. First, the cash advance fee hits when ready — you pay 3 to 5 percent just to get the money. Second, interest starts right away with no grace period. Third, the interest rate itself is higher. A purchase might have a 18 percent APR with a 21-day grace period; a cash advance has a 23 percent APR with zero grace days.

On a $500 withdrawal, you might pay $15 to $25 in fees plus roughly $96 in interest over one year if you do not pay it back. The same $500 purchase with a 21-day grace period and 18 percent APR would cost you $90 in interest over the same year — and that is only if you carried it the full year. Most people pay purchases off faster because they see the interest clock ticking from day one.

Cash advances also do not earn rewards. If your card offers 2 percent cashback on all purchases, that cashback does not explore to cash advances. You pay more to get the money and earn nothing back.

When a cash advance might make sense

A cash advance is rarely the cheapest way to borrow money, but there are situations where it is the fastest option available. If you need cash when ready and have no other source — no savings, no access to a personal loan, no time to wait for a transfer — a cash advance gets you the money in minutes.

It also makes sense if you will pay it back within days or a week. The fee is fixed, so the shorter you carry the balance, the less interest you pay. If you withdraw $500 and repay it within a week, you might pay $20 in fees and $2 in interest — a total of $22. That is expensive, but it is not devastating if you truly have no alternative.

A cash advance does not make sense if you have other options: a personal loan from a bank or credit union, a payday alternative loan from a credit union, or even a balance transfer to a 0 percent APR card. These routes are usually cheaper, especially if you need to carry the balance for more than a few weeks.

Alternatives to a credit card cash advance

If you need cash, explore these options before using a cash advance. A personal loan from a bank or credit union typically has a lower APR than a cash advance and no upfront fee. A payday alternative loan (PAL) from a credit union is capped at $1,000 and charges a maximum of $20 in fees, with an APR that cannot exceed 28 percent. Both take a few days to process but cost far less than a cash advance if you carry the balance.

A balance transfer to a card offering 0 percent APR for 6 to 21 months is another option if you have time to explore and be approved. You pay a balance transfer fee (usually 3 to 5 percent), but you avoid interest charges during the promotional period. This works if you can pay down the balance before the 0 percent period ends.

If you have a savings account, withdrawing from savings costs nothing and avoids debt entirely. If you have a trusted friend or family member, a personal loan from them costs nothing and builds goodwill. These are always cheaper than a cash advance.

Frequently Asked Questions

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

Your cash advance limit is usually 20 to 50 percent of your credit limit and is set separately by the issuer. A $2,000 credit limit might come with a $500 cash advance limit. You can request a higher cash advance limit by calling the issuer, but approval is not may provide. Some issuers will not increase it regardless of your request.

What happens if I do not pay back a cash advance?

The balance stays on your credit card and continues accruing interest. If you do not pay at least the minimum payment, your account goes into default, your credit score drops, and the issuer may close your account. The debt can be reported to a collection agency if it goes unpaid for 180 days. Unpaid cash advances affect your credit the same way unpaid purchases do.

Does a cash advance show up differently on my credit report?

A cash advance appears as part of your overall credit card balance on your credit report. It does not show up as a separate line item or flag. However, the issuer's internal records track it separately for billing purposes, which is why it has its own interest rate and fee structure.

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

Technically yes, but it is a bad idea. You would be taking out a high-interest loan to pay another high-interest loan. You pay the cash advance fee, the higher interest rate, and zero grace period — all to move debt around. A balance transfer to a 0 percent APR card or a personal loan is almost always cheaper.

What is the difference between a cash advance and a balance transfer?

A cash advance gives you physical cash and charges a higher APR with no grace period. A balance transfer moves debt from one card to another and usually comes with a lower APR (often 0 percent for a promotional period) and a grace period. Balance transfers are designed for moving existing debt; cash advances are for getting cash. Balance transfers are cheaper if you need to carry a balance.