What a cash advance is and how it works

A cash advance is a short-term loan against your credit card's available credit. Instead of using your card to buy something, you withdraw cash — either at an ATM, from a bank teller, or through a convenience check mailed by your card issuer. The amount you withdraw counts against your credit limit, just like a purchase does.

The key difference from a regular purchase is cost. Cash advances charge a cash advance fee (usually 3 to 5 percent of the amount withdrawn, with a minimum of $5 to $10), and they carry a higher interest rate than purchases — often 5 to 10 percentage points higher. Interest starts accruing when ready; there is no grace period like there is for purchases. If you withdraw $500, you pay the fee right away and begin paying interest the same day.

Most credit cards allow cash advances up to a set percentage of your available credit — commonly 20 to 50 percent. Your card issuer sets this limit separately from your purchase limit, so you may have $5,000 available to spend but only $1,000 available for a cash advance.

Key Takeaways

  • Cash advances charge an upfront fee (typically 3 to 5 percent) plus a higher interest rate than purchases, with interest starting when ready.
  • You can withdraw cash at an ATM using your PIN, at a bank teller with your card and ID, or by depositing a convenience check.
  • Your cash advance limit is separate from your purchase limit and is usually 20 to 50 percent of your available credit.
  • Paying off a cash advance should be your priority because the interest rate is significantly higher than purchase APR.

Three ways to get cash from your credit card

The most common method is an ATM withdrawal. Insert your credit card and enter your PIN (which you may need to set up first by calling your card issuer). The ATM will show your available cash advance limit. Withdraw the amount you need. The fee and interest begin accruing when ready.

You can also visit a bank branch in person. Bring your credit card and a government-issued ID. Tell the teller you want a cash advance. They will process it on the spot, charge the fee, and hand you cash. This method works even if you do not have a PIN set up.

A third option is a convenience check. Your card issuer may mail these to you automatically, or you can request them. Write a check to yourself or a payee, deposit it in your bank account, and the funds appear as a cash advance on your credit card statement. This method is slower but useful if you need to send money to someone else or do not want to visit an ATM.

Fees and interest you will pay

The cash advance fee is charged once, at the time of withdrawal. A typical fee is 3 to 5 percent of the amount withdrawn, with a minimum charge (often $5 to $10). If you withdraw $300 with a 4 percent fee, you pay $12. If you withdraw $50 with a $5 minimum, you pay $5.

Interest accrues daily from the moment you withdraw the cash. The cash advance APR is usually 5 to 10 percentage points higher than your purchase APR. If your purchase APR is 18 percent, your cash advance APR might be 25 percent. On a $500 cash advance at 25 percent APR, you pay roughly $10.42 per month in interest alone if you make no payment.

When you make a payment to your credit card, the card issuer applies it to your lowest-APR balance first — usually purchases. This means your cash advance interest keeps growing while you pay down purchases. To stop the interest from compounding, pay the cash advance balance in full as soon as you can.

When a cash advance makes sense

A cash advance is useful in specific situations where you need cash urgently and have no other option. If a merchant accepts only cash and you have no access to your bank account, a cash advance may be faster than a trip to your bank. If you are traveling and your debit card is lost or stolen, a cash advance can get you cash when ready.

A cash advance is not a good choice for everyday cash needs, bill payments, or situations where you could wait a day or two. The fees and interest are too high. If you need cash regularly, a checking account with ATM access or a debit card is far cheaper. If you are considering a cash advance to pay another debt, that is a sign to step back and look for other options — the interest rate will make the problem worse, not better.

Some people use cash advances to meet a minimum spending requirement for a credit card bonus. This is a mistake. The fee and interest will almost always exceed the bonus value, and the interest will continue long after the bonus is spent.

How to minimize the cost

The best way to minimize cost is to withdraw only what you need and pay it back as fast as possible. If you withdraw $200 and pay it back within a week, you pay the upfront fee plus roughly one week of interest. If you carry that balance for three months, the interest alone will exceed the fee.

Before you withdraw, check your card's cash advance limit and APR. Call the customer service number on the back of your card or log into your online account. Knowing the exact fee and rate helps you decide whether the cash advance is worth it.

If you have multiple credit cards, use the one with the lowest cash advance APR and fee. The difference between a 3 percent fee and a 5 percent fee on a $500 withdrawal is $10 — small but real. Over time, small differences compound.

After you withdraw the cash, make a plan to pay it back. Set a reminder on your phone or calendar. Treat the cash advance balance as your top priority when you make your next payment. Paying $100 toward a cash advance at 25 percent APR saves you far more in interest than paying $100 toward a purchase at 18 percent APR.

How cash advances affect your credit score

A cash advance does not hurt your credit score directly — it is not reported separately to the credit bureaus. However, it does count toward your credit utilization, which is the percentage of your available credit you are using. If you have a $5,000 credit limit and a $1,000 cash advance, your utilization jumps to 20 percent.

High utilization (above 30 percent) can lower your credit score slightly. The effect is temporary and reverses once you pay the balance down. If you are planning to explore for a loan or mortgage soon, avoid large cash advances in the weeks before you explore.

A cash advance also does not build credit the way a purchase does. Both are reported as credit card activity, but paying off a cash advance does not demonstrate creditworthiness any more than paying off a purchase does. The credit-building benefit comes from using credit responsibly over time, not from the type of transaction.

Alternatives to a credit card cash advance

If you need cash urgently, explore these options first. A personal loan from a bank or credit union usually has a lower interest rate than a cash advance, though approval may take a few days. A payday loan is fast but extremely expensive — often 400 percent APR or higher — and should be a last resort.

If you have a savings account, withdraw from that instead. There is no fee and no interest. If you have a 401(k) or similar retirement account, some plans allow loans against your balance; the interest you pay goes back to your own account. Ask your plan administrator about the terms.

A line of credit from your bank (if you have one) is often cheaper than a cash advance. A balance transfer to a card with a 0 percent introductory APR can work if you need to move money between accounts, though balance transfers also charge a fee (usually 3 to 5 percent).

Frequently Asked Questions

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

Technically yes, but it is a bad idea. You pay the cash advance fee upfront, then pay a higher interest rate on the balance. You are paying more to move debt around, not less. If you are trying to pay off debt, look for a balance transfer card with a 0 percent introductory period instead.

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

The balance stays on your credit card and accrues interest every day. After 30 days of non-payment, the late payment is reported to the credit bureaus and your credit score drops. After 180 days, the account may be charged off and sent to a collection agency. The debt does not disappear.

Does my credit card company have to tell me the cash advance fee before I withdraw?

Yes. Your card issuer must disclose the cash advance fee and APR in your card agreement and on your monthly statement. You can also call customer service or check your online account to see the exact fee and rate before you withdraw.

Can I get a cash advance with a debit card?

No. A debit card draws directly from your bank account; there is no credit line to borrow against. You can withdraw cash from an ATM or bank teller using a debit card, but that is not a cash advance — it is your own money.

Is there a limit to how much I can withdraw?

Yes. Your card issuer sets a cash advance limit, which is usually 20 to 50 percent of your available credit. This limit is separate from your purchase limit. You can check your cash advance limit by calling customer service or logging into your online account.