What a cash advance is and how it works
A cash advance is a way to borrow money against your credit card's available credit. You go to an ATM, a bank teller, or a convenience store and withdraw cash using your card, just like you would with a debit card. The money appears in your account when ready, but the credit card company treats it differently than a regular purchase — it charges you a fee upfront and a higher interest rate from day one.
The key difference: when you buy something with your credit card, you get a grace period (usually 21 to 25 days) before interest starts. With a cash advance, interest starts accruing the moment you withdraw the money. There is no grace period. You also pay a separate fee — typically 3 to 5 percent of the amount you withdraw, with a minimum fee of $5 to $10.
Most people use cash advances when they need physical money urgently and have no other way to get it. It is an expensive option, so it makes sense only when the alternative (overdraft fees, late payments, payday loans) would cost more.
Key Takeaways
- Cash advances charge a fee (usually 3 to 5 percent) plus a higher interest rate than regular purchases, with no grace period.
- You can withdraw cash at an ATM, bank branch, or convenience store using your credit card, and the money is available when ready.
- Interest starts accruing the same day you withdraw the cash, so the longer you carry the balance, the more you pay.
- Your credit card statement will show the cash advance separately from regular purchases, and you may have a lower credit limit for cash advances than for purchases.
- Paying off a cash advance takes priority over paying off regular purchases when you make a payment, so extra payments go to the higher-interest debt first.
Where and how to withdraw a cash advance
You have three main options for getting cash. The fastest and most common is an ATM — you insert your card, enter your PIN, and withdraw up to your cash advance limit. Most ATMs will let you take out cash 24/7, though some banks limit how much you can withdraw per day (often $500 to $1,000).
Your second option is a bank branch — you can walk into any bank during business hours and ask a teller for a cash advance. You will need your card and ID. This method works if you have hit your ATM daily limit or if you want to withdraw a large amount.
Your third option is a convenience store or grocery store with a cash advance service. Some stores offer this, though it is less common than it used to be. You will pay a fee to the store on top of your credit card company's fee, so this is the most expensive route.
Before you withdraw, check your credit card statement or call your card issuer to find out your cash advance limit. This is often lower than your overall credit limit — you might have a $5,000 purchase limit but only a $1,000 cash advance limit. You cannot withdraw more than this amount.
The fees and interest you will pay
A cash advance costs you money in two ways: an upfront fee and ongoing interest. The upfront fee is usually 3 to 5 percent of the amount you withdraw, charged when ready. If you withdraw $500, you might pay $15 to $25 in fees. Some cards have a flat minimum fee ($5 or $10) if the percentage would be lower, so a $100 withdrawal might still cost you $5.
The interest rate on a cash advance is typically higher than the rate on regular purchases — often 2 to 3 percentage points higher. If your regular purchase APR is 18 percent, your cash advance APR might be 21 or 22 percent. This rate applies from the day you withdraw the money, with no grace period.
The longer you carry the balance, the more interest you pay. A $500 cash advance at 21 percent APR costs about $8.75 per month in interest alone. If you pay it off in one month, your total cost is roughly $23.75 (the $15 to $25 fee plus one month of interest). If you carry it for six months, you are paying roughly $45 in interest on top of the fee.
Some cards offer promotional rates on purchases (0 percent for 6 months, for example), but these promotions almost never explore to cash advances. Cash advances are always charged at the regular rate.
How cash advances affect your credit and payment priority
A cash advance does not hurt your credit score directly — it is not reported separately to the credit bureaus. However, it does increase your overall credit card balance, which raises your credit utilization ratio (the percentage of your available credit you are using). If your utilization jumps from 30 percent to 50 percent, your score may drop slightly.
When you make a payment on your credit card, the payment goes to your highest-interest debt first. This means if you have a regular purchase at 18 percent and a cash advance at 21 percent, your payment will pay down the cash advance first. This is good for you — it means you are tackling the most expensive debt. However, it also means the regular purchase balance stays on your card longer, accruing interest.
If you only make the minimum payment, you may not pay off the cash advance for months or years. Credit card companies count on this. The combination of the upfront fee and the high interest rate makes cash advances one of the most expensive ways to borrow money.
When a cash advance makes sense (and when it does not)
A cash advance is worth considering only when you need physical cash urgently and the cost is lower than your alternatives. For example: if you would otherwise pay a $35 overdraft fee, a $15 cash advance fee might be the better choice. If you need $200 for an emergency and a payday loan would cost you $50 in fees, a $6 cash advance fee is cheaper.
A cash advance does not make sense if you are just moving money around — if you need cash to pay a bill that you could pay online, or if you are withdrawing money to pay off another debt. In those cases, you are paying a fee and interest for no real benefit.
It also does not make sense if you cannot pay it back quickly. The interest rate is too high to carry a balance for months. If you need money for more than a week or two, look for a personal loan, a 0 percent balance transfer card, or borrowing from family instead.
How to pay off a cash advance quickly
Once you have withdrawn the cash, your goal should be to pay it back as fast as possible. Every day you carry the balance, you are paying interest at a high rate. If you can pay it back within a few days, do that — the interest charge will be minimal.
When you make a payment, send it directly to your credit card company, not to the store or person you gave the cash to. The payment reduces your cash advance balance, which stops the interest from accruing on that portion. If you send $200 to your card issuer, $200 of your cash advance balance disappears, and interest stops accruing on that $200.
If you have other credit card debt, paying off the cash advance first makes sense because of the higher interest rate. Once the cash advance is gone, you can focus on the regular purchase balance.
Some people use a balance transfer card to move a cash advance balance to a 0 percent promotional rate, but this only works if you have not already maxed out your credit. It also means you are moving the debt rather than paying it off, so it only helps if you can pay down the balance during the promotional period.
Frequently Asked Questions
Can I get a cash advance if I have a low credit limit?
Yes, but your cash advance limit is usually separate from and lower than your purchase limit. If your total credit limit is $2,000, your cash advance limit might be only $500. Call your card issuer to find out what your cash advance limit is before you try to withdraw.
What happens if I only pay the minimum payment on a cash advance?
The balance stays on your card and continues to accrue interest at the high cash advance rate. You will pay far more in interest than the original fee. For example, a $500 cash advance at 21 percent APR with a minimum payment of 2 percent per month takes about 30 months to pay off and costs roughly $160 in interest alone.
Can I use a cash advance to pay off another debt?
Technically yes, but it is usually a bad idea. You are paying a fee and a high interest rate to move money from one debt to another. Unless the debt you are paying off has a much higher interest rate (which is rare), you are just making your situation more expensive.
Do cash advances show up on my credit report?
Cash advances do not appear as a separate line item on your credit report. However, they increase your overall credit card balance, which raises your credit utilization ratio and may lower your credit score slightly. The impact is temporary and goes away once you pay off the balance.
What is the difference between a cash advance and a balance transfer?
A cash advance gives you physical cash and charges a fee plus a high interest rate. A balance transfer moves debt from one card to another and usually has a lower fee and a promotional 0 percent rate for a set period. Balance transfers are for moving existing debt; cash advances are for getting cash.