What a cash advance is and how it works
A cash advance is when you borrow money directly from your credit card issuer using your card's cash advance limit. You go to an ATM, bank, or other location and withdraw cash up to that limit. The money appears in your account immediately, but the debt goes on your credit card balance just like a purchase would — except with higher costs attached.
The key difference from a regular purchase: cash advances charge interest from day one. There is no grace period. A purchase might give you 21 to 25 days before interest starts; a cash advance starts accruing interest the moment you withdraw it. The interest rate on cash advances is also typically higher than your regular purchase APR — often 3 to 5 percentage points more, depending on your card and issuer.
Your card issuer sets a separate cash advance limit, which may be lower than your overall credit limit. If your credit limit is $5,000, your cash advance limit might be $1,500. You can find this limit in your cardholder agreement or by calling the number on the back of your card.
Key Takeaways
- Cash advances charge interest immediately with no grace period, and the interest rate is usually higher than your purchase rate.
- You can withdraw cash at ATMs, banks, or through a convenience check, but each method charges a separate fee on top of interest.
- Your cash advance limit is separate from your credit limit and is often much lower.
- Most people should avoid cash advances because the cost adds up quickly; a personal loan or line of credit is usually cheaper.
Where and how to withdraw a cash advance
You have three main ways to get cash from your credit card. The most common is an ATM withdrawal: insert your card at any ATM that accepts your card network (Visa, Mastercard, American Express, or Discover), enter your PIN, and withdraw up to your cash advance limit. The money is available immediately.
The second method is to visit a bank branch — yours or any bank that accepts your card — and ask the teller for a cash advance. You will need your card and ID. This method often charges a lower fee than an ATM, and some banks waive the fee if you are a customer there.
The third method is a convenience check. Your issuer may send you blank checks tied to your credit card account. You write one out and deposit it like a regular check, or give it to a merchant. The amount borrowed shows up as a cash advance on your card. Not all issuers offer these, and they carry the same high costs as ATM withdrawals.
Fees and interest rates you will pay
Every cash advance comes with at least two costs. The first is a cash advance fee, charged by your issuer at the time you withdraw. This is usually either a flat dollar amount (commonly $5 to $10) or a percentage of the amount withdrawn (typically 3 to 5 percent). If you withdraw $500 with a 4 percent fee, you pay $20 immediately.
The second cost is interest, which starts accruing the day you withdraw. The rate varies by card and issuer. A cash advance APR might be 24 to 29 percent on a standard credit card, or higher on a card for people rebuilding credit. Interest compounds daily, so the longer you carry the balance, the more you owe.
Some ATMs also charge a separate ATM operator fee — usually $2 to $3 — on top of your issuer's fee. This is charged by the ATM owner, not your card company. You will see it disclosed on the ATM screen before you complete the withdrawal.
Because of these layered costs, a $500 cash advance can easily cost $50 to $100 in fees and interest over a few months, depending on how quickly you pay it back.
How cash advances affect your credit and account
A cash advance shows up on your credit report as a balance on your credit card account, just like a purchase does. It counts toward your overall credit utilization — the percentage of your available credit you are using. If you have a $5,000 limit and a $1,500 cash advance, your utilization jumps to 30 percent. High utilization can lower your credit score.
Cash advances also do not earn rewards or cash back, even if your card offers them on purchases. You pay the cost but get no benefit on the other end.
When you make a payment to your card, your issuer applies it to balances in a set order — usually purchases first, then cash advances and balance transfers last. This means if you have both a purchase and a cash advance balance, your payment goes toward the purchase first, and the cash advance keeps accruing interest longer.
Cheaper alternatives to a cash advance
Because cash advances are expensive, you should explore other options first. A personal loan from a bank or credit union typically charges 8 to 18 percent interest with no daily fees, making it far cheaper than a cash advance even if your credit is not perfect. You can often get one within a few days.
A line of credit from your bank works similarly — you borrow what you need and pay interest only on what you use. Many banks offer these to existing customers at rates lower than credit card cash advances.
If you need cash for an emergency, a payday loan is another option, though it is also expensive — typically 400 percent APR or higher. It is still worth comparing to a cash advance if you can pay it back within two weeks.
If you have a 401(k) or similar retirement account, you may be able to borrow against it at a much lower rate than any of these options. Check with your plan administrator about the terms.
When a cash advance might make sense
Cash advances are rarely the right choice, but there are narrow situations where they might be. If you need cash for a true emergency — a car repair to get to work, a medical bill — and you can pay it back within a week or two, the total cost might be acceptable compared to the cost of not fixing the problem.
If you have a 0 percent introductory APR on cash advances (rare, but some cards offer it), a cash advance during that period costs only the upfront fee, making it cheaper than a personal loan with origination fees.
In most other cases, the cost is not worth it. If you are considering a cash advance to pay another debt, to cover regular expenses, or because you do not have savings, that is a sign you need a different solution — a personal loan, a conversation with a creditor about payment options, or a budget adjustment.
How to pay back a cash advance
Once you have withdrawn the cash, the balance appears on your credit card statement. You pay it back the same way you pay any credit card balance — by making a payment to your card issuer by the due date. The minimum payment will be listed on your statement, but paying only the minimum means the balance will grow because of interest.
To minimize the cost, pay as much as you can as soon as you can. Every dollar you pay reduces the daily interest charge. If you withdrew $500 at 25 percent APR with a 4 percent fee ($20), you owe $520 to start. If you pay it back in full within two weeks, you might pay $50 total in fees and interest. If you carry it for three months, you could pay $100 or more.
Some issuers allow you to set up automatic payments to your card, which can help you stay on track and avoid late fees.
Frequently Asked Questions
Can I get a cash advance if I have a low credit score?
Yes. Your cash advance limit is set by your issuer based on your account history and creditworthiness, but if you have an active card account, you usually have some cash advance limit available. Call the number on your card to find out what yours is. The limit may be much lower than your purchase limit, but it exists.
What is the difference between a cash advance and a balance transfer?
A balance transfer moves debt from one card to another (usually to a card with a lower introductory rate). A cash advance borrows new money against your card. Balance transfers often have a lower fee and may have a 0 percent introductory period. Cash advances charge interest from day one and have higher fees. If you are trying to move existing debt, a balance transfer is usually better.
Will a cash advance hurt my credit score?
It can, because it increases your credit utilization — the percentage of available credit you are using. High utilization can lower your score. The impact is temporary and goes away as you pay the balance down. Late payments or missed payments on the cash advance will hurt your score more seriously and for longer.
Can I dispute a cash advance fee?
You can contact your issuer and ask them to review the fee, especially if you were not aware of the rate or if the fee was applied in error. Some issuers will waive a fee as a one-time courtesy, particularly if you have been a customer for a long time. There is no harm in asking, but the fee is part of the standard terms of a cash advance.
How long does a cash advance stay on my credit report?
The balance itself does not stay on your report — it disappears once you pay it off. But if you miss payments, those late payments stay on your report for seven years. If the account goes to collections, that also stays for seven years. Pay on time to avoid this.