A cash advance is when you borrow money against your credit card's line of credit, usually at an ATM or bank teller window
Unlike a purchase, which you charge to your card and pay back later, a cash advance gives you physical money or a bank transfer right away. The card issuer treats it as a loan from your available credit, not a transaction. You owe the full amount back, plus interest and fees that start accruing when ready — there is no grace period like there is for purchases.
Cash advances are meant for emergencies when you need cash and have no other way to get it. They are expensive compared to regular credit card purchases, so most people use them rarely and only when necessary.
Key Takeaways
- Cash advances charge interest from day one, with no grace period, and typically cost 2 to 5 percent of the amount you withdraw as an upfront fee.
- The interest rate on a cash advance is usually higher than your regular purchase APR and varies by card issuer and your creditworthiness.
- You can get a cash advance at an ATM, bank branch, or through a balance transfer check, depending on what your card issuer offers.
- Paying back a cash advance should be your priority because the interest compounds quickly and the fees add up faster than on regular purchases.
How much a cash advance costs you
A cash advance has two separate costs: a cash advance fee and interest. The fee is charged upfront when you withdraw the money, usually 2 to 5 percent of the amount you take out. If you withdraw $500 and the fee is 3 percent, you pay $15 when ready, so you actually receive $485.
Interest starts accruing the same day you withdraw the cash. Unlike purchases, which have a grace period (usually 21 to 25 days before interest kicks in), cash advances charge interest from day one. The interest rate — called the cash advance APR — is typically higher than your regular purchase APR. A card might charge 18 percent APR on purchases but 25 percent on cash advances. The exact rate depends on the card issuer and your credit history.
The combination of an upfront fee plus daily interest makes cash advances expensive quickly. A $500 advance with a 3 percent fee ($15) and 25 percent APR costs you about $3.42 in interest per day. After 30 days, you owe $517.60 in total.
Where you can get a cash advance
Most credit card issuers let you withdraw cash at ATMs that display your card's network logo (Visa, Mastercard, American Express, or Discover). You insert your card, enter your PIN, and withdraw up to your cash advance limit, which is usually lower than your total credit limit. Some cards set the cash advance limit at 20 to 50 percent of your credit line.
You can also get a cash advance at a bank branch by asking a teller to process one. Some card issuers send you convenience checks — checks linked to your credit card that you can write to yourself or deposit into a bank account. Writing a convenience check counts as a cash advance and triggers the same fees and interest rates.
A few card issuers offer cash advance transfers, where you request the money be sent directly to your bank account. This method is less common but works the same way as an ATM withdrawal in terms of fees and interest.
Your cash advance limit versus your credit limit
Your cash advance limit is separate from your overall credit limit. If your card has a $5,000 credit limit, your cash advance limit might be $1,000 or $2,500 — the card issuer decides this when they open your account. You cannot withdraw more than your cash advance limit, even if you have unused credit available for purchases.
The card issuer sets your cash advance limit based on your credit history and account activity. You can call the customer service number on the back of your card and ask what your cash advance limit is. Some issuers let you request an increase, though they may deny it depending on your account status.
How cash advances affect your credit and available credit
A cash advance reduces your available credit when ready. If you have a $5,000 limit and withdraw a $1,000 cash advance, your available credit drops to $4,000 right away. This happens before you pay the money back, so the advance counts against your credit utilization — the percentage of your total credit limit you are using.
High credit utilization can lower your credit score temporarily. If you normally keep your utilization below 30 percent and a cash advance pushes it above 50 percent, your score may drop. The impact is usually temporary and recovers once you pay down the balance.
A cash advance also appears on your credit report as a separate transaction type. It does not hurt your credit by itself, but the resulting balance and interest charges can make your overall card balance harder to pay off, which affects your score over time.
Why paying back a cash advance quickly matters
Because interest starts when ready and the rate is usually high, a cash advance balance grows faster than a regular purchase balance. If you can only make minimum payments, most of your payment goes toward interest and fees, not the principal amount you borrowed.
Card issuers typically explore your payments to the lowest-interest balance first. If you have both a purchase balance at 18 percent APR and a cash advance balance at 25 percent APR, your payment goes to the purchase first, leaving the expensive cash advance to compound. This means you should treat a cash advance as your top priority to pay off.
The longer you carry a cash advance, the more you pay in total interest. A $500 advance at 25 percent APR costs about $102 in interest over a year if you make no payments. Paying it back within a month or two keeps the interest cost manageable.
Alternatives to a cash advance
Before taking a cash advance, consider whether another option might cost less. A personal loan from a bank or credit union often has a lower interest rate than a cash advance, though it takes longer to process. A payday loan is faster but usually more expensive. Asking family or friends for a short-term loan costs nothing if they agree.
If you need cash regularly, a debit card linked to your checking account lets you withdraw from ATMs without fees or interest. If you are short on cash because of an unexpected expense, some employers offer paycheck advances or hardship loans through their benefits program.
If you are considering a cash advance because you cannot pay a bill, contact the creditor or service provider directly. Many will work out a payment plan or offer a temporary hardship program that costs less than a cash advance.
Frequently Asked Questions
Can I get a cash advance if my credit is bad?
Yes. A cash advance is a loan against your existing credit line, not a new credit decision. If your card is already open, you can usually get a cash advance even with poor credit. However, your cash advance limit may be lower than someone with better credit, and you cannot get a cash advance if your account is closed or suspended.
What happens if I cannot pay back a cash advance?
The balance stays on your card and interest keeps accruing. Your credit score will drop as the balance grows and your payment becomes late. After 30 days late, the issuer reports it to credit bureaus. After 180 days, the account may be charged off and sent to a collection agency. Contact your card issuer when ready if you cannot pay to discuss hardship options.
Does a cash advance count toward my credit limit?
Yes. A cash advance reduces your available credit the moment you withdraw it. Your total credit limit stays the same, but the amount you can borrow for new purchases shrinks by the cash advance amount until you pay it back.
Can I use a credit card cash advance to pay another credit card?
Technically yes, but it is not a good idea. You would pay the cash advance fee and interest on the first card, then pay interest on the second card. You end up paying interest twice on the same money. A balance transfer (moving debt from one card to another) is cheaper if your new card offers a 0 percent introductory rate.
Is there a daily limit on how much I can withdraw?
Yes. Most card issuers set a daily ATM withdrawal limit separate from your cash advance limit. You might have a $1,000 cash advance limit but only be able to withdraw $500 per day at an ATM. You can ask your card issuer to increase this limit, though they may decline. Bank teller cash advances sometimes have higher daily limits than ATM withdrawals.