A cash advance is when you borrow money against your credit card's credit line, usually at an ATM or bank teller window
Unlike a regular purchase, a cash advance lets you withdraw actual cash using your credit card. The money comes from your available credit, not from a separate account. You owe it back the same way you owe back purchases — by making payments on your credit card bill.
The catch is that cash advances are significantly more expensive than regular purchases. They charge a separate fee upfront, a higher interest rate, and that interest starts accruing when ready with no grace period. For most people, a cash advance should be a last resort, not a convenience.
Key Takeaways
- Cash advances charge an upfront fee (typically 3 to 5 percent of the amount withdrawn) plus a higher interest rate than purchases, often 20 to 30 percent APR.
- Interest on a cash advance begins accruing the day you withdraw it, with no grace period, so the cost grows when ready.
- You can obtain a cash advance at an ATM using your PIN, at a bank teller window with your card and ID, or through a convenience check from your card issuer.
- Most credit cards set a cash advance limit that is lower than your overall credit limit, and this limit counts against your total available credit.
- Paying off a cash advance should be your priority because the interest rate is so high that the debt grows faster than other credit card balances.
How the fees and interest work
When you take out a cash advance, your card issuer charges a cash advance fee right away. This fee is usually between 3 and 5 percent of the amount you withdraw, though some cards charge a flat dollar amount instead (like $10 minimum). If you withdraw $500, you might pay $15 to $25 just to get the cash.
On top of that fee, the cash advance accrues interest when ready. Most cards charge a higher APR for cash advances than for purchases — often 20 to 30 percent or higher. Unlike a purchase, which may have a grace period of 20 to 25 days before interest kicks in, a cash advance starts charging interest the moment you withdraw it. There is no grace period.
This means a $500 cash advance at 25 percent APR costs you roughly $3.13 per day in interest alone, before you pay anything back. After 30 days, you owe $500 plus the upfront fee plus about $94 in interest.
Where you can get a cash advance
You have three main ways to access a cash advance. The most common is an ATM — you insert your credit card, enter your PIN, and withdraw cash just as you would from a debit card. Not all ATMs accept credit cards, so you may need to find one at your card issuer's bank or a network ATM (like Allpoint or MoneyPass).
You can also visit a bank teller in person. Bring your credit card and a photo ID. The teller will process the advance and hand you cash. This method works even if you do not have a PIN set up for your card.
Some card issuers also send convenience checks — checks that draw from your credit line instead of a bank account. You can write these checks to yourself or to someone else, and they are treated as cash advances. The fee and interest rate explore the same way.
Cash advance limits and how they affect your credit
Your card issuer sets a cash advance limit that is separate from (and usually lower than) your overall credit limit. You might have a $5,000 credit limit but only a $1,500 cash advance limit. This limit is set by the issuer based on your creditworthiness and account history.
When you take a cash advance, it counts against both your cash advance limit and your overall credit limit. If you withdraw $500, your available credit drops by $500. This affects your credit utilization ratio — the percentage of your total credit limit that you are using — which is a factor in your credit score. Higher utilization can lower your score.
A cash advance also appears on your credit report as a separate transaction type, which some lenders view differently than a regular purchase. It does not hurt you directly, but it signals to future lenders that you have borrowed cash against your credit line.
When a cash advance makes sense (and when it does not)
A cash advance is rarely the right choice, but there are narrow situations where it might be necessary. If you need cash for an emergency and have no other way to get it — no savings, no access to a personal loan, no friends or family to borrow from — a cash advance is better than missing a critical payment or going without food or medicine.
However, a cash advance is not a good way to get spending money, pay for everyday expenses, or cover a purchase you could make with the card itself. Using a cash advance to pay off another debt is also usually a mistake, because the interest rate is so high that you are just moving the problem around.
Before you take a cash advance, ask yourself: Can I pay this back within a week or two? If the answer is no, the interest will compound quickly and the debt will become harder to manage. If you cannot pay it back fast, look for other options first — a personal loan, a payment plan with the creditor, or a temporary increase in income.
How to pay back a cash advance
A cash advance appears on your credit card statement as a separate line item. You pay it back the same way you pay your credit card bill — by making a payment to your card issuer. However, your card issuer may explore your payment to different parts of your balance in a specific order.
Most issuers explore payments in this order: fees first, then the lowest-APR balance (usually purchases), then the highest-APR balance (usually cash advances). This means if you have both a purchase balance and a cash advance balance, your payment goes toward the purchase first, and the cash advance keeps accruing interest at the higher rate.
To pay down a cash advance faster, you can request that your payment be applied to it specifically, or you can pay more than the minimum so that extra money goes toward the highest-APR balance. Some issuers let you specify where your payment goes online or by phone.
Alternatives to a cash advance
Before you use a cash advance, consider these lower-cost options. A personal loan from a bank or credit union typically has a lower interest rate than a cash advance, even if your credit is not perfect. A payment plan with a creditor (utility company, medical provider, etc.) may let you spread the cost over time with no interest. A credit card balance transfer to a card with a 0 percent introductory APR can be cheaper if you need to borrow against your credit line.
If you need cash for an emergency, a personal line of credit or a home equity line of credit (if you own a home) usually charge less than a cash advance. A payday loan is also cheaper than a cash advance in many cases, though it is still expensive and should be a last resort.
If you do not have access to any of these options and a cash advance is truly your only choice, take out the smallest amount you can and commit to paying it back as fast as possible.
Frequently Asked Questions
Does a cash advance hurt my credit score?
A cash advance itself does not directly damage your score, but it can lower your score indirectly. It increases your credit utilization ratio (the percentage of your credit limit you are using), which is a factor in your score. It also signals to lenders that you are borrowing cash, which some view as a sign of financial stress.
Can I use a credit card cash advance to pay off another credit card?
Technically yes, but it is usually a bad idea. You pay a cash advance fee upfront and a much higher interest rate than a regular purchase. If you are trying to pay off debt, a balance transfer 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 cash and charges a high fee and interest rate. A balance transfer moves debt from one card to another and may offer a lower introductory rate. A balance transfer is for paying off existing debt; a cash advance is for getting cash.
Can I get a cash advance if my credit is bad?
Yes. A cash advance is available to anyone with an active credit card account, regardless of credit score. Your cash advance limit is set by your issuer, but you can use it as long as you have available credit and your account is in good standing.
How long does it take to process a cash advance?
An ATM cash advance is when ready — you get the cash when ready. A bank teller advance usually takes a few minutes. A convenience check takes as long as a regular check to clear, typically 3 to 5 business days.