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A cash advance fee is a charge that credit card companies assess when you tap your line of credit to get cash. The fee can be in the form of a flat charge or a percentage of the advance amount, and between the upfront fee and the higher interest rate on cash advances, it's best to avoid them if possible.
What Is a Cash Advance Fee?
You can use a cash advance in a pinch to tap into your line of credit to get cash, but it comes at a cost. A credit card cash advance fee is a charge that your credit card issuer makes you pay to complete a cash advance.
The most common structure is 5% of the advance amount or $10, whichever is more. But some card issuers may charge less or more than that.
In addition to the cash advance fee, card issuers also typically charge a higher APR compared to the rate charged on regular purchases. What's more, cash advances don't qualify for the same grace period as purchases, so interest starts accruing immediately.
How Much Does a Cash Advance Cost?
To give you an idea of how much a cash advance can cost, let's say you have a card that charges a 5% fee with a $10 minimum and a 28% cash advance APR, and you pay off your cash advance in six months:
|Costs Associated with a Cash Advance|
|Cash Advance Amount||Fee||Monthly Payment||Interest||Total Cost|
Note that any credit card payments you make beyond your required minimum monthly payment are applied to the balance with the highest interest rate, which will likely be your cash advance. If you have a balance that's currently benefiting from a 0% introductory APR, that payment priority is especially important to keep in mind.
Alternatives to a Cash Advance
A credit card cash advance can provide you with quick access to cash via an ATM, bank transfer or even at the teller counter at a bank or credit union. And compared to high-interest options like payday loans and auto title loans, they can be preferable.
But there may be other opportunities to get cash fast without incurring such a high fee. Here are some potential options:
- Cash advance apps: Also called paycheck advance apps, these services can offer advances ranging from $25 to $1,000, depending on which one you choose. Many of them don't charge interest or fees on advances, but you may need to pay extra to get your money quickly.
- Salary advance: If your employer offers salary advances, contact your payroll manager to discuss your options and how it might affect your upcoming paychecks.
- Third-party payment services: If you have an upcoming expense that you can't use your credit card for, consider a third-party service like Plastiq, which can allow you to pay certain bills that don't usually allow credit cards. Plastiq charges a fee of 2.9%, which is far less than what you'd pay with a cash advance fee and APR.
- Buy now, pay later services: Some buy now, pay later services can allow you to make purchases online—and sometimes even in-store—and pay them off over time with no interest or fees. In many cases, there's also no hard credit check when you apply.
- Personal loan: If you have good credit, you may be able to get a personal loan with a much lower interest rate. Some lenders don't even charge upfront fees. What's more, many lenders offer same- or next-day disbursement of your funds once you're approved.
- Loan from a family member or friend: If you have a loved one who's willing to lend you some money, you may be able to get the help you need without additional costs. Just make sure you draw up a contract with your friend or family member to make it official, and pay off the debt on time or early to avoid damaging your relationship.
Build Your Credit to Improve Your Access to Cash
It can be stressful to be low on cash, particularly if your credit needs some work and you don't have access to affordable financing options. While it might not help out this time, prepare yourself for future financing needs by working to improve your credit.
To get an idea of which steps to take, register with Experian to access your credit score and Experian credit report for free. Evaluate your credit health and look for areas where you can make some improvements. You can also monitor your FICO® Score☉ over time to track your progress and get real-time alerts when changes are made to your report.
As you work on establishing a positive credit history, you'll have better odds of getting approved for credit with favorable terms when you need it.