A cash advance is when you borrow money directly from your credit card's line of credit, usually at an ATM or bank teller, rather than using the card to buy something

The money hits your account within minutes or hours. But a cash advance is not the same as a regular purchase. Your credit card company charges you a separate fee upfront — typically 3 to 5 percent of the amount you withdraw — and the interest rate on that borrowed cash is almost always higher than your regular purchase rate. There is no grace period either, meaning interest starts accruing the moment you take the money out.

Cash advances exist because sometimes you need actual dollars in your pocket, not a card to swipe. But they are expensive, and most people should treat them as a last resort when no other borrowing option is available.

Key Takeaways

  • Cash advances charge an upfront fee of 3 to 5 percent plus a higher interest rate than purchases, with no grace period.
  • You can get a cash advance at an ATM using your PIN, at a bank teller with your card and ID, or sometimes through a convenience check your card issuer sends you.
  • Interest on a cash advance starts accruing when ready, even if you pay off your statement balance in full.
  • Most credit card issuers set a limit on how much you can withdraw as a cash advance, which may be lower than your overall credit limit.
  • Paying back a cash advance is slower than paying back purchases because payments go to purchases first under most card agreements.

How the fees and interest work

When you take out a cash advance, your card issuer charges you a cash advance fee right away. This fee is a percentage of the amount you withdraw — typically 3 to 5 percent, though some cards charge a flat dollar amount instead if that is higher. A $300 cash advance with a 4 percent fee costs you $12 when ready.

On top of that fee, you pay interest at a rate that is usually 5 to 10 percentage points higher than your regular purchase APR. If your card charges 18 percent APR on purchases, the cash advance APR might be 24 or 28 percent. That interest starts the day you withdraw the money — there is no 21-day grace period like there is for purchases. If you carry the balance for a month, you are paying roughly 2 percent of the amount borrowed in interest alone.

Because of how credit card payments work, money you send to your card goes toward purchases first, not the cash advance. This means if you have both a purchase balance and a cash advance balance, your payment reduces the purchase balance while the cash advance keeps accruing interest at that higher rate.

Where you can get a cash advance

The most common way is at an ATM. You insert your credit card, enter your PIN (which you may need to set up first if you have never used the card for a cash advance), and withdraw cash up to your limit. The ATM charges you the cash advance fee when ready, and the amount appears on your next statement.

You can also get a cash advance at a bank teller by bringing your credit card and a photo ID. The teller processes it the same way an ATM does, and you walk out with cash. Some banks charge an additional fee for this service on top of your card issuer's fee.

Some credit card issuers send convenience checks — checks drawn on your credit card account. You write one to yourself or to a creditor, and it counts as a cash advance. These also carry the cash advance fee and higher interest rate, even though you are not withdrawing physical cash.

Cash advance limits and how they differ from your credit limit

Your credit card issuer sets a separate cash advance limit, which is often lower than your overall credit limit. If your card has a $5,000 credit limit, your cash advance limit might be $1,000 or $1,500. This limit is set by the issuer based on your creditworthiness and account history, and you cannot exceed it even if you have available credit remaining on your card.

You can contact your card issuer to ask what your cash advance limit is, and some issuers allow you to request an increase. However, requesting an increase may trigger a hard inquiry on your credit report. Your cash advance limit is separate from any balance transfer limit your card may have, which is another way to move money between accounts.

Why paying back a cash advance takes longer

When you make a payment to your credit card, the card issuer applies it to your balances in a specific order set by federal law. Purchases are paid off first, then balance transfers, then cash advances. This means if you owe $500 in purchases and $300 in a cash advance, and you send in a $400 payment, that $400 goes entirely toward the purchase balance. The cash advance keeps accruing interest at the higher rate while you wait to pay it off.

This is one reason cash advances are so expensive over time. Even if you are paying your card regularly, the cash advance portion of your debt lingers and costs you more in interest. If you need to borrow money, a personal loan or a 0 percent balance transfer card (if you may have access to) is almost always cheaper.

When a cash advance might make sense

A cash advance is rarely the best borrowing option, but there are narrow situations where it might be the only one available. If you need cash when ready and have no access to a personal loan, a line of credit, or a lower-interest loan from a bank or credit union, a cash advance gets you the money fast. The fee and interest are painful, but sometimes speed matters more than cost.

A cash advance also makes sense if you need a small amount of cash for a short time and you know you can pay it back within a week or two. The fee is fixed, so a $100 cash advance with a $4 fee is not catastrophic if you repay it quickly before much interest accrues. But if you are carrying the balance for months, the interest will dwarf the upfront fee.

Alternatives to a cash advance

Before you use a cash advance, consider other ways to get cash or borrow money. A personal loan from a bank or credit union usually has a lower interest rate than a cash advance, even if it takes a few days to fund. A 0 percent balance transfer to a new card (if you may have access to) lets you move debt interest-free for 6 to 21 months, though it also carries a balance transfer fee. Asking friends or family for a short-term loan, borrowing from your employer's 401(k) if allowed, or using a buy-now-pay-later service for a specific purchase are all cheaper than a cash advance.

If you are in a genuine emergency and have no other options, a cash advance is better than missing a critical payment or going without necessary funds. But it should be a last resort, not a habit. The fees and interest add up quickly, and they make it harder to pay down your overall credit card balance.

Frequently Asked Questions

Does a cash advance hurt my credit score?

The cash advance itself does not directly hurt your score, but it does increase your credit utilization — the percentage of your available credit you are using. If your cash advance pushes your total balance higher, your utilization goes up, which can lower your score temporarily. Paying it back quickly brings your utilization back down.

Can I get a cash advance if I have a low credit limit?

Yes, but your cash advance limit is usually a percentage of your overall credit limit, often 20 to 50 percent. If your credit limit is $500, your cash advance limit might be $100 to $250. Contact your card issuer to find out what your specific limit is.

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

It becomes part of your credit card debt and accrues interest at the higher cash advance rate. If you do not pay your card bill, the issuer reports the missed payment to credit bureaus, which damages your credit score. They may also charge late fees and eventually pursue collection action.

Is there a way to avoid the cash advance fee?

No. The fee is charged by your card issuer and is non-negotiable. Some cards advertise lower cash advance fees than others, but every card charges something. The only way to avoid the fee is to not take a cash advance.

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

Technically yes, but it is a bad idea. You would pay the cash advance fee and higher interest rate to borrow money that you then use to pay another card's balance. You are paying to move debt around rather than reducing it. A balance transfer is a better option if you need to move debt between cards.