What Is a Cash Advance and How Does It Work?

Quick Answer

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.

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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.

How Does a Cash Advance 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:

  • ATM withdrawal: To get a cash advance from an ATM, start by inserting your credit card into the ATM and entering your PIN. Select the option to make a withdrawal and follow the prompts on screen. You may have to pay an ATM fee if you're using another bank's ATM. Accept the fee if you're prompted and the cash will be dispensed to you. Finally, you can take your card and end the transaction.
  • Bank or credit union: You may be able to withdraw cash at a participating bank if using an ATM isn't an option. Let the bank teller know you'd like to take a credit card cash advance and specify the amount. Make sure to have your credit card and government-issued ID ready to show the teller.
  • Online: You may be able to take out a cash advance online through online banking or your bank's mobile app. The exact steps vary by bank, but you'll typically select the option to transfer money. Select your credit card as the account the funds will come from and your checking account as the account funds will go to.
  • Convenience check: You can use convenience checks mailed by your card issuer for cash or bank deposit. Write the check to yourself and include the amount of cash you need. Endorse the check, then take it to your bank to cash or deposit it.

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.

  • Convenience checks
  • Lottery tickets and gambling
  • Buying foreign currency
  • Wire transfers
  • Money orders
  • Overdraft protection
  • Person-to-person money transfers

Check your credit card terms to learn if other transactions may be considered cash advances.

What Is a Cash Advance Fee?

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:

  • Cash advance APR: The APR applied to cash advances. The cash advance APR is often much higher than the regular APR for purchases.
  • Cash advance fee: Charged as a flat fee or percentage of the cash advance amount, whichever is higher.
  • ATM fee: A withdrawal fee charged if your card isn't within the bank or ATM operator's network.

How Much Does a Cash Advance Cost?

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 29%. If you repay the $500 back in one month, you'll pay 29% / 12, or $12.69 in interest. Your total cost to repay the cash advance would be:

$500 + $25 + $12.69 = $537.69

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.

Pros and Cons of a Cash Advance

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.

How a Cash Advance Impacts Your Credit Score

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.

Better Alternatives to a Cash Advance

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.

  • Tap into your emergency fund. If you have one, tap into your emergency fund to avoid taking on high-interest rate debt.
  • Borrow from friends and family. It's not always comfortable borrowing from loved ones, but it can save money on interest. Create a loan agreement and be sure to repay your loan on time.
  • Get a personal loan. If you can qualify for a personal loan, the interest rate will likely be lower than what you'll pay for a cash advance.
  • Take a salary advance. Talk to your payroll manager about options for receiving your salary a few days sooner via salary advance.

Frequently Asked Questions

  • Allocate as much money as you can toward paying off the cash advance to minimize interest cost. Pay more than the minimum each month, and use any unexpected income to make lump-sum payments toward the advance. If you qualify, consider taking advantage of a balance transfer to make repayment more manageable.

  • Not necessarily. Cash advances are only reported to credit bureaus as part of your overall credit card balance, so the transaction itself is not factored into your credit score. A cash advance would only hurt your credit score indirectly if it raises your credit utilization ratio or causes you to miss payments.

  • You can borrow up to your available cash advance limit, which may be lower than your regular credit limit for purchases. Any existing balance may also lower your available cash advance limit. Check your credit available for cash advances by logging in to your online account or calling customer service.

The Bottom Line

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 free credit report and score to see the areas you should focus on to raise your score.

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