What is a cash advance? Will it hurt my credit to get one?

Dear Readers,

We sometimes get asked what a cash advance is and if it can hurt credit reports and scores.

A cash advance is essentially a short term loan that you charge against your credit card. Many credit card companies offer this service, allowing you to use your credit card to obtain a certain amount of cash at an ATM or with a bank teller, similar to the way you would use a debit card.

How Cash Advances Work

The amount of cash you are allowed to withdraw is a percentage of your credit limit. In most cases, you will only be able to withdraw a few hundred dollars this way.

Cash advances are subject to different terms and conditions than regular purchases made with a credit card. When you borrow cash against a credit card, the credit card company will usually charge a cash advance fee that is a percentage of the amount you are withdrawing. This is in addition to any ATM or teller fees charged for the transaction.

The interest rates on cash advances are often higher than the interest rate for regular purchases made on the credit card. Furthermore, unlike regular credit card purchases, there is no grace period before interest starts accruing, so the lender will begin charging interest on the cash advance from day one.

Cash Advances and the Impact on Credit Reports and Scores

Credit reports do not indicate when a cash advance is taken against a credit card account, so cash advances do not affect your credit history directly.

However, because cash advances typically come with high interest rates and additional fees, they can cause the balance on the account to grow quickly, making it difficult to keep up with monthly payments.

If credit card balances continue to increase, or you have difficulty making payments on time, there may be a negative effect on your credit report and credit scores.

Because of this, you should be very careful about taking cash advances against your credit cards. If you do need to take out a cash advance, be sure you understand the terms and make every effort to pay back the balance in full as soon as you can.

Payday Loans and Personal Loans

There are other types of short-term loan options that an individual might consider to help cover unexpected expenses. View more information about payday loans, debt consolidation and how it impacts credit and using personal loans to pay off credit card debt to find out what you should take into consideration before making a decision.

Thanks for asking.
The "Ask Experian" Team

Sign up for helpful tips, special offers and more!
You're signed up!
Our system is undergoing maintenance and will be available again soon.