A cash advance is when you borrow money against your credit card's credit limit, getting cash in hand instead of making a purchase
You walk into an ATM, insert your credit card, and withdraw $200. Or you go to a bank teller and ask for a cash advance. The money appears in your account, but it is not a purchase — it is a loan. The credit card company has lent you that money at a higher interest rate than your regular card purchases, with fees attached from the moment you take it out. Unlike a purchase you make with your card, a cash advance starts charging interest immediately. There is no grace period.
Cash advances are different from balance transfers (moving debt from one card to another) and different from using your debit card at an ATM. A cash advance is specifically borrowing against your credit card's available credit, and the terms are set by your card issuer, not by you.
Key Takeaways
- Cash advances charge interest from day one with no grace period, unlike regular credit card purchases which may have 21 to 25 days before interest starts.
- Most cards charge a cash advance fee of 3 to 5 percent of the amount withdrawn, plus a higher interest rate than purchases — often 20 to 30 percent APR or more.
- You can get a cash advance at an ATM, bank teller, or sometimes through a convenience check, but each method has its own fee structure.
- Cash advances count against your credit limit, so withdrawing $500 reduces the credit available for purchases by $500.
- The cash advance balance is usually repaid last when you make payments, meaning purchase balances get paid down first.
Where you can get a cash advance and how much it costs
You have three main ways to take a cash advance. At an ATM, you insert your credit card and withdraw cash like you would with a debit card — but the ATM operator (often a bank or independent network) charges a fee, usually $2 to $5, on top of your card issuer's cash advance fee. At a bank teller, you can ask for a cash advance directly; the bank charges no additional fee beyond what your card issuer charges. Through a convenience check, your card issuer mails you blank checks that draw against your credit line; writing one is treated as a cash advance.
The cost structure is steep. Your card issuer charges a cash advance fee, typically 3 to 5 percent of the amount you withdraw — so a $500 advance costs $15 to $25 before interest. Then the card charges interest at a rate that is usually 5 to 10 percentage points higher than your purchase APR. If your card charges 20 percent on purchases, the cash advance rate might be 25 or 30 percent. That interest starts accruing immediately, with no grace period. A $500 advance at 25 percent APR costs about $10 per month in interest alone.
ATM fees stack on top. If you withdraw $200 from an out-of-network ATM, you might pay $3 to $5 to the ATM operator, plus 3 to 5 percent ($6 to $10) to your card issuer, plus interest starting that day. The total cost of borrowing $200 for one month can easily exceed $20.
How a cash advance affects your credit limit and credit score
When you take a cash advance, the amount is deducted from your available credit immediately. If your card has a $5,000 limit and you withdraw $500, you now have $4,500 available for purchases. The $500 cash advance balance appears on your credit report as a separate line item from your purchase balance.
A cash advance can lower your credit score in two ways. First, it increases your credit utilization ratio — the percentage of your available credit you are using. If you use $500 of a $5,000 limit, your utilization jumps to 10 percent. High utilization signals risk to lenders and can drop your score by 10 to 50 points depending on how much you are already using. Second, the cash advance itself is a new debt inquiry and a new account activity, which can cause a small temporary dip.
The damage is usually temporary if you repay quickly. Once the balance is paid off, utilization drops and the score recovers. But if you carry the cash advance balance month to month, the utilization stays high and the score stays depressed.
How repayment works and why it matters which balance you pay first
When you make a payment to your credit card, the card issuer applies it in a specific order set by law and by your card's terms. Payments go to the balance with the highest interest rate first — which is usually your cash advance. However, some cards apply payments to the lowest-balance item first, or split payments proportionally. Check your card's terms to know for certain.
The order matters because cash advances charge the highest interest. If you have a $300 purchase balance at 20 percent and a $200 cash advance balance at 28 percent, and you pay $100, that $100 should go to the cash advance to save you money. But if your card applies it to the purchase instead, the cash advance keeps accruing interest at 28 percent while you chip away at the cheaper debt.
The safest approach is to pay off the cash advance in full as soon as you can, then tackle purchase balances. If you cannot pay it in full, call your card issuer and ask how payments are applied, then make extra payments specifically toward the cash advance to reduce that high-interest debt faster.
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 fee but no interest. Even a credit card purchase at your regular APR is cheaper than a cash advance because of the higher rate and immediate interest.
A cash advance makes sense only in narrow situations: you need cash urgently, you have no other source of funds, and you can repay it within a few days. For example, if your car breaks down and the mechanic takes only cash, and you can pay back the advance from your next paycheck, the total cost might be $15 to $30 — worth it to avoid a larger problem. But if you are using a cash advance to cover regular expenses or to fund a purchase you cannot otherwise make, you are paying a premium for money you cannot afford.
Before taking a cash advance, ask yourself: Can I borrow from a friend or family member? Can I use a personal loan? Can I wait until I have the cash? Can I use a debit card or check instead? If the answer to any of those is yes, that option is cheaper.
Frequently Asked Questions
Does a cash advance show up on my credit report?
Yes. The cash advance balance appears as a separate line item on your credit report, distinct from your purchase balance. It counts toward your total credit utilization and can affect your credit score. Once you pay it off, it stops appearing as an active balance, but the history of the transaction remains on your report.
Can I use a cash advance to pay another credit card?
Technically yes, but it is expensive. You would pay the cash advance fee (3 to 5 percent) plus the higher interest rate, and you would be converting one debt into another without reducing the total amount owed. This is usually a sign that you need to talk to a credit counselor or explore a debt consolidation loan instead.
What happens if I do not pay back a cash advance?
The balance stays on your card and accrues interest every month. After 30 days of non-payment, it is reported as late to the credit bureaus and your score drops significantly. After 180 days, the card issuer may charge off the account and sell the debt to a collection agency, which can pursue you for payment.
Is there a limit to how much I can withdraw as a cash advance?
Yes. Your card issuer sets a cash advance limit, which is often lower than your total credit limit — sometimes 20 to 50 percent of it. You can find your cash advance limit in your card agreement or by calling the issuer. The limit exists to reduce the card company's risk.
Can I get a cash advance from a credit card I do not have in my wallet?
No. You need the physical card to withdraw from an ATM, or you need to contact your card issuer directly to arrange a convenience check or bank teller advance. You cannot take a cash advance using just your card number online.