A cash advance is a short-term loan against your credit card's available balance, taken as cash rather than a purchase
When you take a cash advance, you are borrowing money directly from your credit card issuer. You can get the cash at an ATM using your PIN, at a bank teller window, or through a cash advance check the card issuer sends you. The money appears in your account within one to three business days, depending on the method and your bank.
Unlike a purchase on your card, a cash advance does not go through the normal credit card payment cycle. It starts accruing interest immediately — there is no grace period — and the interest rate is almost always higher than your purchase rate. Most card issuers also charge an upfront fee, usually 3 to 5 percent of the amount you withdraw.
Key Takeaways
- Cash advances charge interest from day one with no grace period, and the interest rate is typically 5 to 10 percentage points higher than your purchase rate.
- You pay an upfront fee of 3 to 5 percent of the cash amount, in addition to interest charges.
- Cash advances are reported to credit bureaus as debt and can lower your credit score by increasing your overall credit utilization.
- Payments toward a cash advance go to the lowest-interest debt on your card first, so the advance may take months to pay off even if you make regular payments.
Interest rates and fees on cash advances
Your card's cash advance interest rate is set by the issuer and appears in your cardholder agreement. It is almost never the same as your purchase rate. If your purchase rate is 18 percent, your cash advance rate might be 25 or 28 percent. Some cards charge rates as high as 30 percent for cash advances.
The upfront fee is separate from interest. A $500 cash advance with a 5 percent fee costs you $25 immediately, plus interest that starts accruing the same day. If you carry the advance for a month at 25 percent annual interest, you owe roughly $10 more in interest alone. Over three months, interest alone can exceed $35.
Your card issuer sets both the rate and the fee, and you cannot negotiate them. You can find both numbers in your cardholder agreement or by calling the customer service number on the back of your card and asking for the cash advance terms.
How cash advances affect your credit score
A cash advance increases your credit utilization ratio — the amount of available credit you are using. If your card has a $5,000 limit and you take a $1,000 cash advance, your utilization jumps to 20 percent. Credit scoring models treat cash advances the same as purchases when calculating utilization, so the advance counts against you immediately.
The advance also appears as a separate line item on your credit report, labeled as a cash advance or cash loan. This signals to other lenders that you borrowed cash against your card, which some view as a sign of financial strain. The combination of higher utilization and the cash advance notation can lower your score by 10 to 50 points, depending on your current score and credit history.
How payments are applied when you carry multiple balances
If you have both purchases and a cash advance on the same card, your payment goes to the lowest-interest debt first. This means your payment reduces your purchase balance before it touches the cash advance, even though the cash advance has a much higher interest rate. This is called the payment hierarchy, and it is set by federal law.
The result is that your high-interest cash advance keeps growing while you pay down your lower-interest purchases. If you owe $2,000 in purchases at 18 percent and $500 in a cash advance at 28 percent, and you send $300, that $300 goes entirely to the purchase balance. The cash advance keeps accruing interest untouched.
To pay off a cash advance faster, you must pay more than the minimum or pay the entire balance at once. Some cardholders make a separate, larger payment specifically labeled for the cash advance, though the card issuer's system may still apply it according to the payment hierarchy.
When a cash advance makes sense and when it does not
A cash advance is rarely the cheapest way to borrow money. A personal loan from a bank or credit union typically charges 8 to 15 percent interest with no upfront fee. A payday loan charges a flat fee but is meant for very short repayment periods. Even a credit card purchase at your regular rate is cheaper than a cash advance.
A cash advance may be the only option if you need cash immediately and have no other source. An emergency car repair, a medical bill, or a travel situation where only cash is accepted might justify the cost. But if you have time to explore alternatives — a personal loan, a line of credit, or borrowing from family — those are almost always cheaper.
Avoid a cash advance if you cannot pay it back within one or two months. The longer you carry it, the more interest compounds, and the payment hierarchy means the balance shrinks slowly. A $500 cash advance carried for six months can cost you $75 to $100 in interest and fees combined.
Cash advance limits and how they work
Your card issuer sets a separate cash advance limit, which may be lower than your overall credit limit. A card with a $10,000 purchase limit might have only a $2,000 cash advance limit. This limit is set by the issuer based on your credit history and account performance, and you cannot change it without calling customer service and requesting an increase.
The cash advance limit counts against your overall available credit. If you have a $2,000 cash advance limit and a $10,000 total limit, taking a $1,000 cash advance leaves you $1,000 in cash advance capacity and $9,000 in purchase capacity. Once you hit your cash advance limit, you cannot withdraw more cash on that card until you pay down the balance.
Alternatives to cash advances
If you need cash and want to avoid the high cost of a cash advance, consider these options first. A personal loan from a bank, credit union, or online lender typically charges 8 to 18 percent interest with no upfront fee and allows you to repay over months or years. A line of credit works similarly but lets you borrow only what you need when you need it.
A balance transfer to a card offering 0 percent introductory rates can be cheaper if you need to move existing debt, though it does not give you cash. Some employers offer paycheck advances or emergency loans to employees at no interest. Family or friends may lend you money interest-free if the situation allows.
If you have a home, a home equity line of credit (HELOC) typically charges 6 to 10 percent interest. If you have a 401(k), some plans allow you to borrow against your balance at a low rate, though this has tax consequences if you leave your job. Each option has trade-offs, but nearly all are cheaper than a cash advance.
Frequently Asked Questions
Can I use a cash advance to pay another credit card?
Technically yes, but it is a costly strategy. You pay the cash advance fee and interest rate on the money, then use it to pay another card's balance. You end up paying two sets of fees and a higher interest rate than if you had transferred the balance directly or paid the original card down with other funds. A balance transfer is cheaper if your goal is to move debt between cards.
Does a cash advance show up on my credit report?
Yes. The cash advance appears as a separate account or transaction type on your credit report and is visible to other lenders. It signals that you borrowed cash against your card, which can affect how other lenders view your creditworthiness. The advance also increases your credit utilization, which can lower your score.
What happens if I only pay the minimum on a cash advance?
The minimum payment covers interest and a small portion of principal, so the balance shrinks very slowly. A $500 cash advance at 28 percent interest with a minimum payment of 2 percent of the balance takes roughly 18 to 24 months to pay off, and you pay $150 to $200 in interest alone. Paying more than the minimum is strongly recommended.
Can I get a cash advance with a debit card?
No. Debit cards draw directly from your bank account and do not carry a separate credit line. You can withdraw cash at an ATM or bank teller using your debit card, but that is not a cash advance — it is simply accessing your own money. A cash advance is only available with a credit card.
Is there a way to avoid the cash advance fee?
No. The fee is set by your card issuer and is charged automatically when you take the advance. You cannot negotiate it or waive it. The only way to avoid the fee is to not take a cash advance and instead use an alternative source of funds.