

A cash advance is a short-term cash loan from your credit card issuer. It’s a quick way to get cash, but fees and high interest rates make it expensive.
A cash advance is a short-term cash loan from your credit card issuer. It's a convenient way to access cash without having to apply for new credit. However, the costs make it an expensive way to get money in a pinch. Let's explore how cash advances work.
Most credit cards let you borrow a set amount of cash as an advance that you pay back with interest. Generally, you can only borrow up to your card's cash advance limit, which may be lower than your regular credit limit. Check your credit card statement, online account or contact the credit card company to find your available cash advance limit.
When you take a cash advance, it gets added to your credit card balance and accrues interest until it's repaid just like purchases and balance transfers do. The annual percentage rate (APR) for cash advances is typically higher than the APR for purchases. You can find it on your credit card statement or by contacting your card issuer. Unlike purchases, there's no grace period on cash advances—they begin accruing interest as soon as you borrow the money.
You can get a cash advance in these ways:
Your card issuer may classify several other transactions as cash advances. These cash-like transactions are charged a cash advance fee and accrue interest at the higher cash advance APR.
Check your credit card terms to learn if other transactions may be considered cash advances.
Credit card cash advances usually come with high charges. Check your cardholder agreement to understand how much a cash advance will cost you before you consider taking one.
Here are the typical cash advance costs you can expect:
Let's say you use your credit card to take out a $500 cash advance. Your credit card issuer charges a cash advance fee of 5% or $10, whichever is higher. For a $500 cash advance, a 5% fee would be $25.
Many credit cards carry a cash advance APR of around 29%. If you repay the $500 back in one month, you'll pay 29% divided by 12, or $12.69 in interest. Your total cost to repay the cash advance would be:
However, if you can only pay $50 each month, it would take a year to pay off the cash advance, and you'd pay a total of $112.98 in interest and fees.
Using your credit card to get cash comes with both benefits and drawbacks.
Fast access to cash: Immediate access to cash can be helpful in an emergency when you can't use your credit card.
No credit check: Since you're accessing a credit line you already established, you don't have to go through a credit check. This helps if you don't have time to wait for loan underwriting or you have poor credit.
No grace period: You don't get a chance to pay off the balance interest-free because interest begins accruing immediately.
High fees and APR: The fees and higher interest rate increase the cost of borrowing, especially if you can't repay the cash advance quickly.
Potential damage to your credit scores: Using a large part of your credit limit can raise your credit utilization and hurt your credit scores.
Using your credit card for a cash advance doesn't directly affect your credit score. Your credit report won't show that you used your credit card to get cash. However, the cash advance does increase your credit card balance and could hurt your credit score if it pushes your credit utilization ratio too high.
Your credit utilization ratio shows the percent of available credit you're using. A high ratio can hurt your credit score, especially once it climbs above 30%.
A cash advance could also affect your credit if your budget is already tight or if taking on high-interest credit card debt would make it harder to stay on top of your bills. Since your payment history is a major factor in your credit score, falling behind on payments could have a significant negative effect.
A cash advance should be a last resort for a financial emergency. Consider some alternatives before turning to a cash advance as a source of money.
Taking out a cash advance may seem like a good idea when you're in a bind, but it's an expensive way to borrow money. While alternatives may not be as convenient, they're less costly and have a lower risk of getting you into long-term debt. If you ultimately have to take out a cash advance, repay it as quickly as possible to reduce the amount of interest you pay.
Improving your credit can help you access affordable financing options in the future. Start by checking your credit report and FICO® ScoreΘ for free to see the areas you should focus on to raise your score.
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See your offersLaToya Irby is a personal finance writer who works with consumer media outlets to help people navigate their money and credit. She’s been published and quoted extensively in USA Today, U.S. News and World Report, myFICO, Investopedia, The Balance and more.
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