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What Is a Cash Advance On a Credit Card: A Complete Guide

A cash advance means borrowing cash from your credit card account instead of withdrawing from debit account. But is it the right thing to do?
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024
The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.
Author: Baruch Mann (Silvermann)
Baruch Mann (Silvermann)

Writer, Contributor

Experience

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
Interest Rates Last Update: April 15, 2024

The banking product interest rates, including savings, CDs, and money market, are accurate as of this date.

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Using your credit card to make purchases has become a normal and even natural practice for many of us.  It has become almost automatic to use our credit card in everything such that we don’t even think about it anymore.

We use our credit cards to pay for practically anything: for groceries, gas, food, utilities, college tuition, online shopping, etc.  I bet you can’t even remember the last time you made a substantial cash purchase, let alone carry a load of cash in your wallet or purse.

Many of us have grown accustomed to paying purchases with a credit card that using cash has become a strange feeling.  But what if you need cash in a hurry and you need more than what you currently have in your bank account?  This is the time when a cash advance may prove useful. 

However, before you go to this option, learn all the pros and cons of using a credit card cash advance.  Then, you can decide if it is the correct financial solution for you.

Key Takeaways

  • A credit card cash advance involves borrowing cash from the credit card account. Customers can withdraw cash from the credit card using ATM.
  • Customers can not withdraw their entire credit limit by cash advance. This is because many credit card companies limit the total amount of cash advance and this limit is usually lower than the credit limit.
  • The use of cash advances does have significant financial downsides. Firstly, clients must pay steep fees when using a cash advance, which is typically expressed as a percentage or flat rate. At the same time, cash advances typically carry higher interest than the money spent on purchases.

What Is A Credit Card Cash Advance?

A credit card cash advance means borrowing cash from your credit card account instead of withdrawing from your debit account.

Most credit card companies have a cash advance feature on their cards as a form of convenience to cardholders aside from being able to use it for daily purchases.  Getting a cash advance is as easy as withdrawing from an ATM or writing a check at your bank.  But take note, that this convenience carries quite a high cost for you.

While financially, getting a cash advance is not very ideal or wise, it makes sense when your money problem is unpredictable or if you find yourself in an emergency.

When You May Need A Credit Card Cash Advance?

If you’re the type of person who only brings credit cards for your day-to-day spending, there might find yourself in a situation where the seller does not accept credit cards.

Some examples of ‘cash-only’ vendors are street-food sellers, farmers' market vendors, small mom-and-pop operations, etc.  

In such a case, it might be tempting to just get a credit card cash advance.  Some people might also resort to cash advances when they need paper money but don’t have enough in their bank account.

What's The Simplest Way To Take a Cash Advance?

For those who are looking to take a cash advance with a credit card, the simplest way to do so is at a local ATM.

Most credit card companies allow their card members to use the ATM, it will show up as a cash advance on their credit card statement.

When taking a cash advance through an ATM, you are required to have a pin in order to complete the transaction. If you do not have a pin set up, you must first call the company to set up the pin, then you may take the cash withdrawal.

How Much Cash Can You Withdraw?

You can withdraw only up to your cash advance limit, which is usually lower than your total credit limit.

You can review your recent credit card statement or log in to your online account to check your cash advance limit and how much of it is still available.  Your available cash advance limit may be lower than your actual limit if you already have an existing balance on the card.

How Much is a Credit Card Cash Advance Fee?

You may have to pay a fee for a cash advance transaction and a higher interest for the amount you have withdrawn.

The cash advance fee could be a percentage of the cash advance amount or a flat rate, depending on your credit card issuer.  Check your credit card terms to know the exact fee you need to pay for a cash advance transaction.

The exact amount of your cash advance fee will depend on the amount you’ve withdrawn and the way your credit card issuer calculates the fee.

You’ll also have to pay a cash advance fee when you use a cash advance convenience check or use your credit card as overdraft protection or other cash equivalent transaction.  The fee for using your credit card for overdraft protection will usually be different from the regular cash advance fee.

Cash Advance Fee - Example

The common practice is to charge whatever is higher between a flat fee and a percentage of the cash advance.  For example, the usual cash advance fee is greater between $10 or 5% of the withdrawn amount.

So, using these parameters, if you take out a cash advance of $100, the issuer will choose between the flat rate of $10 or $5 (5% of $100). 

In this case, you will have to pay $10 which is a higher amount.  But supposing you take a cash advance of $500, you will have to pay $25 (5% of $500) which is higher than the $10 flat rate.

How To Check What Is My Cash Advance Fee?

Current regulations require your credit card issuer to disclose the method it uses to calculate your cash advance fee.

Check your credit card agreement or the fine print of your billing statement for more information.  If you have questions about your cash advance fee, get in touch with your credit card’s customer service department. 

The number is usually printed on the back of your credit card.  Know how they will compute the cash advance fee so it won’t come as a surprise.

Card
Cash Advance Fee
Cash Advance APR
freedom_unlimited_card_alt
Chase Freedom Unlimited®
$10 or 5%, whichever is greater.
24.99%

chase_sapphire_preffered

Chase Sapphire Preferred® Card
$10 or 5%, whichever is greater.
25.74% Variable

Citi-costco-anywhere-visa-credit-card review

Costco Anywhere Visa® Card by Citi
$10 or 5%, whichever is greater.
28.99% Variable

AMEX Blue Cash Preferred Card review

Blue Cash Preferred® Card from American Express
$10 or 5%, whichever is greater.
28.99% Variable
Amex-Blue-Cash-everyday
Blue Cash Everyday® Card from American Express
$10 or 5%, whichever is greater.
28.99% Variable

capital-one-venture

Capital One Venture Rewards Credit Card
$10 or 3%, whichever is greater.
24.90% Variable

Discover it® Cash Back
$10 or 5%, whichever is greater.
27.99% variable

OpenSky® Secured Visa® Credit Card

OpenSky® Secured Visa® Credit Card
$6 or 5%, whichever is greater.
20.39% Variable

Wells Fargo ReflectSM Card (1)

Wells Fargo Reflect® Card
$10 or 5%, whichever is greater.
29.74% Variable

Main Drawbacks Of Using A Cash Advance

While its main advantage is convenience – it’s relatively easy to get and does not require you to store any money upfront in any account, there are a couple of serious drawbacks to consider:

Your card issuer will collect this from you.  As discussed above, some charge a flat fee per cash advance ($5 or $10).  Others charge a percentage of the amount you withdraw, sometimes as high as 5%.  Most of the time, it’s a percentage with a minimum dollar amount – such as 3% or $10, whichever is higher.

The institution that will handle the transaction will collect this from you.  It could be the owner of the ATM or the branch where you will claim your advance.

 This is a financial double-edged sword that cuts you two ways.  First, you have to pay a higher interest rate for cash advances compared to interest on purchases. 

Next, the interest will accrue almost immediately.  You will not enjoy any grace period such as what you will have with purchases.

 Under Federal Law, credit card issuers will apply the minimum payment to balances with the highest interest rate.  However, for anything beyond the minimum, credit card companies get a free hand.  Often, it will take longer to pay off a cash advance balance – and obviously, paying longer means you’ll pay more interest in the long run.

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Do Cash Advances Hurt Your Credit?

The good news for people using cash advances with a credit card is that they will not directly hurt your credit score.

What will hurt your credit score is that the cash advance will increase your balance on the credit card, which will raise your credit utilization ratio. The credit utilization ratio is a major factor in determining credit scores, so in a roundabout way, cash advances could hurt your credit score.

Should I Use Cash Advance?

If you step back and look at the entire picture, you will see that the cons really outweigh the pros.  It might be too easy to take out a cash advance within your credit limit but unless it is an extreme emergency, it should be your last option.

You may be tempted to get a cash advance given its convenience but remember that it is a very costly way to get money fast.  So before considering this option, you might want to explore other ways to get the cash that you need.  Yes, a cash advance can help you remedy an unexpected expense but it can be a very expensive short-term borrowing.

It is crucial that you take stock of your finances carefully and decide logically.  If you do decide to get a cash advance, make sure that you have a plan how to pay it off quickly so you can get your finances back on the level.  Paying your cash advance fast will have a more positive impact on your finances and credit score.  Using this type of facility once in a while has its purpose.  However, avoid making it a habit to use this high-interest loan very often. 

Alternatives To Cash Advances

As there are a number of problems associated with cash advances, there are a number of alternatives one could use instead of cash advances.

  • Credit Card Loan Programs 

Instead of cash advances, many credit card companies offer loans to their existing customers. This still has a fee associated with it, but the interest rates are much lower than the cash advance interest rates.

  • Third-Party payment services 

Some companies allow you to use a credit card to cover expenses that aren’t typically able to be paid with a credit card like rent, utilities, and daycare. An example company would be Plastiq, which has a 2.85% service fee, which will charge your card for the bill, and make out a check to the vendor in your name.

  • Buy now, pay later

Other companies like Affirm, Afterpay, and Klarna, will allow you to break up purchases into smaller installments to be paid over time with a credit card. It should be noted that these options do have interest rates and high fees, but if paid off quickly it wouldn’t be too much of an issue.

  • Personal Loans

There are a number of different personal loans that lenders offer. While they do have relatively high interest rates, they are still typically lower than cash advances.

  • Quick Cash Options 

If your financial situation requires a quick cash solution, there are a few ways to remedy your situation. One could cash out their rewards, request an advance on their paycheck, or ask for local assistance.

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FAQs

The limit on a cash advance is determined by the credit limit as it is capped at a percentage of your limit. For example, if you have a credit limit of $15,000, and the limit is 30%, the maximum for a cash advance would be $4,500.

Apple Card does not offer cash advance. However, you could use the Apple Card wherever the MasterCard network is accepted and purchase a prepaid card.

The typical cash advance interest rates are anywhere from 17.99% – 29.99% APR.

A merchant cash advance (MCA) is an advance of capital that is paid back using future credit card sales. This is an alternative financing option to the traditional small-business loan.

This is best for small companies that need money immediately in order to cover their cash-flow shortages but come with alarmingly high annual percentage rates in the triple digits.

Picture of Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Baruch Silvermann is a financial expert, experienced analyst, and founder of The Smart Investor.  Silvermann has contributed to Yahoo Finance and cited as an authoritative source in financial outlets like Forbes, Business Insider, CNBC Select, CNET, Bankrate, Fox Business, The Street, and more.
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