What happens when you withdraw cash from a credit card
Yes, you can withdraw money from your credit card at an ATM or bank counter, but it is not the same as using your card to buy something. When you take out cash, the credit card company treats it as a cash advance — a loan to you that starts charging interest immediately, usually at a higher rate than purchases.
The moment you complete the withdrawal, interest begins to accrue. Unlike a purchase, where you might have a grace period of 20 to 30 days before interest kicks in, a cash advance has no grace period. You also pay an upfront fee, typically 3 to 5 percent of the amount withdrawn, charged to your card right away.
The cash goes into your pocket, but the debt goes onto your credit card balance. You repay it the same way you repay any credit card debt — through monthly payments to the card issuer.
Key Takeaways
- Cash advances charge interest from day one with no grace period, and the interest rate is usually 2 to 5 percentage points higher than your purchase rate.
- You pay an upfront fee of 3 to 5 percent of the amount withdrawn, added to your balance immediately.
- You can withdraw cash at ATMs, bank branches, or through a teller, but the amount is limited by your credit limit and your card's daily withdrawal cap.
- Paying back a cash advance should be a priority because the cost compounds quickly compared to other ways of borrowing money.
Where and how to withdraw cash from your card
You can get a cash advance in three ways. The most common is using an ATM that displays your card's logo — Visa, Mastercard, American Express, or Discover. Insert your card, enter your PIN, and withdraw up to your daily limit. The ATM will show you the fee before you confirm the transaction.
You can also go to a bank branch and ask a teller for a cash advance. Bring your card and ID. The teller will process it the same way, and you will see the fee before you leave the counter.
A third option is a convenience check — a check issued by your credit card company that you can deposit or cash. These work like a cash advance but let you move the money through a bank account first. The fees and interest rates are the same.
Your card issuer sets a daily withdrawal limit, which is often lower than your total credit limit. For example, you might have a $5,000 credit limit but only be able to withdraw $500 per day in cash. Check your card's terms or call the number on the back to find out your specific limit.
The fees and interest rates you will pay
A cash advance costs you money in two ways: an upfront fee and ongoing interest. The upfront fee is usually 3 to 5 percent of the amount withdrawn. If you withdraw $200, you might pay $6 to $10 in fees added to your balance right away.
The interest rate on a cash advance is separate from your purchase rate. Most card issuers charge 2 to 5 percentage points higher on cash advances. If your purchase APR is 18 percent, your cash advance APR might be 23 or 25 percent. This rate applies from the day you withdraw the money, not from your next billing date.
Interest compounds daily, so the longer you carry the balance, the more you owe. A $500 cash advance at 25 percent APR costs about $10 in interest in the first month if you make no payment. If you carry it for six months, the interest alone could exceed $60.
How a cash advance affects your credit and finances
A cash advance shows up on your credit report as a balance on your credit card, just like any other charge. It counts toward your credit utilization — the percentage of your available credit you are using. High utilization can lower your credit score, even if you pay on time.
Because the interest rate is high and starts immediately, a cash advance is an expensive way to borrow money. If you need cash, other options are usually cheaper: a personal loan from a bank or credit union, a line of credit, or even a payday loan from a licensed lender (though those have their own drawbacks). A cash advance should be a last resort, not a regular way to get spending money.
If you carry a cash advance balance alongside regular purchases, your payments go toward the lowest-interest debt first — usually your purchases. This means the cash advance interest keeps growing while you pay down other charges. Check your card's payment allocation policy to understand how your payments are split.
When a cash advance makes sense
A cash advance is rarely the best choice, but there are narrow situations where it might be worth the cost. If you have a genuine emergency — a car repair, a medical bill, or an urgent expense — and you have no other way to pay, a cash advance is faster than a personal loan application.
A cash advance also makes sense if you can pay it back within a few weeks. The fee is fixed, so the total cost is predictable. A $200 withdrawal with a $10 fee costs you $10 no matter what. If you repay it in two weeks, the interest is minimal — maybe $2 or $3. If you carry it for months, the interest balloons.
If you are considering a cash advance to pay another debt, pause and think about the math. A cash advance at 25 percent interest is more expensive than most other debts. Using it to pay off a lower-rate loan or credit card usually makes your situation worse, not better.
Alternatives to a cash advance
Before you withdraw cash from your credit card, explore other options. If your bank offers a line of credit or overdraft protection, the interest rate is usually lower than a cash advance. Some employers offer paycheck advances or emergency loans to employees. Credit unions often have lower rates on personal loans than banks do.
If you need cash for a specific purchase, ask the seller whether they accept payment plans or whether you can use your credit card directly instead of withdrawing cash. Many retailers offer zero-interest financing for large purchases.
If you are in a financial crisis and cannot pay bills, contact your creditors, utility companies, or a nonprofit credit counselor. Many have hardship programs or payment deferrals that cost less than a cash advance.
How to repay a cash advance quickly
If you have already taken a cash advance, your priority is to pay it off as fast as you can. Make a payment larger than your minimum, and make it as soon as you have the money. Every dollar you pay reduces the balance that is accruing interest at that high rate.
If you have other credit card balances, consider whether you can redirect money from those payments to the cash advance instead. Because the cash advance rate is higher, paying it off first saves you the most money overall.
Do not take another cash advance to pay off the first one. That adds another fee and extends the debt. If you are stuck in a cycle of cash advances, that is a sign you need to look at your overall budget or talk to a credit counselor about a debt management plan.
Frequently Asked Questions
Can I use a cash advance to pay off another credit card?
Technically yes, but it is usually a bad idea. You pay a 3 to 5 percent fee upfront, plus interest at a higher rate than your purchase rate. Unless the card you are paying off has a much higher rate and you can pay the advance off in weeks, you will end up paying more, not less.
What is the difference between a cash advance and a balance transfer?
A balance transfer moves debt from one card to another and usually has a lower introductory rate. A cash advance puts cash in your hand and charges a higher rate from day one. Balance transfers are for moving existing debt; cash advances are for getting spending money.
Will a cash advance hurt my credit score?
It can, because it increases your credit utilization and shows as a new balance on your report. The impact depends on how much you withdraw and how quickly you pay it back. Paying it off within a few weeks minimizes the damage.
Can I withdraw more than my credit limit?
No. Your cash advance is limited by your available credit, just like any other charge. Your card issuer may also set a separate daily or monthly cash advance limit that is lower than your total credit limit.
Do I have to use my PIN to get a cash advance?
At an ATM, yes. At a bank teller, you can show your ID instead. With a convenience check, you do not need a PIN — you just sign the check and deposit or cash it like any other check.