How Does a Cash Advance Work on a Credit Card?

A cash advance is a short-term loan from your credit card issuer that lets you borrow money against your credit line.

We don’t recommend cash advances because you typically have to pay high fees and interest rates. But a cash advance might be necessary for an emergency situation where you need actual cash because credit isn’t accepted and you don’t have access to other options. For example, paying for medical bills or car repairs in a situation where a merchant doesn’t accept credit cards.

Let’s explore how a cash advance works on a credit card so you can see whether it makes sense for you.

Key takeaways

• A cash advance on a credit card is equivalent to taking a cash loan out against your line of credit.
• We generally don’t recommend using credit card cash advances because of the fees and interest rate charges associated with them.
• Your cash advance limit is typically 30% or less of your credit limit on a credit card.
• Using a cash advance adds debt to your credit card balance, which could affect your credit utilization and credit score.
• Cash advance alternatives include getting a paycheck advance, using a debit card, cashing out credit card rewards, and more.

Are credit card cash advances worth it?

How does a cash advance work on a credit card?

A credit card cash advance is a method of using your credit card to receive actual cash by borrowing from your credit card company.

Your cash advance limit is how much money you can receive from your credit card with a cash advance. It’s often 30% or less of your total credit limit. For example, a card with a $10,000 credit limit might have a cash advance limit of $3,000.

Keep in mind that you can’t do a cash advance that puts you above your card’s credit limit or your cash advance limit. If you already had an $8,000 balance on your credit card, you wouldn’t be able to take a cash advance of more than $2,000 because your total credit limit is $10,000.

Cash advances vs. credit card purchases

Cash advances and credit card purchases are somewhat similar but have a few major differences. You receive actual money with a cash advance, whereas your credit card purchases send money to the service provider or vendor.

The nature of what you borrow is different as well. You borrow cash from a credit card company with a cash advance and borrow credit from a credit card company with a typical credit card purchase.

Both types of transactions are added to your credit card balance and have to be paid back. And you typically have to pay interest on any balance you carry. In many cases, the annual percentage rates (APRs) are higher on cash advances than on standard credit card purchases.

How to get a credit card cash advance?

It depends on your financial institution, but you can typically get a credit card cash advance:

• Using an ATM: You can use your credit card at an ATM and select cash withdrawals.
• Using a convenience check: Your credit card company may send you convenience checks that you can use to withdraw cash just like regular checks.
• Visiting an in-person branch: You can visit a branch of your credit card issuer and request a cash advance. Make sure to have your ID and credit card.

Is getting a cash advance a good idea?

Although you may want to avoid cash advances, there are some situations where they might be useful. These are situations where you specifically need cash rather than credit and have no other option.

For example, your car might break down on a road trip, and the only mechanic in the area doesn’t accept credit cards. So you need some cash to pay for repairs and get back on the road.

Or you could be traveling abroad and have to visit an emergency room or clinic for an unexpected illness or injury. Again, you might need some cash if the service provider or vendor doesn’t accept credit cards, but you have no other option to get cash.

Other than emergency situations, you might be better off avoiding cash advances. The cash advance fees and interest rate charges often aren’t worth paying for.

What is the cost of a credit card cash advance?

The cost of a cash advance varies by credit card and credit card issuer, but there are often three primary costs to be aware of:

1. Cash advance fees: Most credit cards charge a fee when you use a cash advance. This could be a flat fee or a percentage of the transaction. For example, the Chase Sapphire Preferred^® Card charges a cash advance fee of $10 or 5% of the amount of each transaction, whichever is greater.
2. ATM fees: You might have to pay an ATM fee if you use an ATM to process your cash advance. This could add a few or more dollars to the total cost.
3. Interest charges: A cash advance may start accruing interest immediately and may have a higher APR than regular purchases on a credit card. For example, the Chase Sapphire Preferred has a regular APR of 20.74% - 27.74% Variable and a higher APR for cash advances of 29.49% Variable.

Let’s say you want to take out a $500 cash advance on your credit card. If there’s a 5% cash advance fee, that’s $25. If you have to pay an ATM fee, that might be another $5.

Assuming your cash advance APR rate is 30%, you might accrue $12.65 in daily compounding interest after a month. Your total cost in this example would be $42.65.

If you don’t want to pay so much for a cash advance, learn how to avoid cash advance fees.

Is getting a cash advance a bad idea?

In most cases, getting a cash advance can be a bad idea. Unless it’s an emergency, the fees and interest rates are typically too high to warrant using cash advances. Alternative options may make more sense because they can have lower costs.

For example, you might want some cash to use while traveling in another country, knowing that many small shops and merchants aren’t going to accept credit cards. Is it worth paying upward of $25 or more in fees — not including what you might have to pay in interest — to get $500 in cash from a cash advance?

That decision is up to you, but we think it isn’t worth it. It makes more sense to use a debit card from banks with no international ATM fees or explore other alternatives to cash advances.

5 alternatives to cash advances

Rather than dealing with the potentially high costs of cash advances, consider some alternative options that can give you access to cash in a pinch.

1. Paycheck advance apps

A paycheck advance app can help you get your paycheck early, sometimes by as much as two days. This could be helpful if you’re short on cash but have a paycheck coming in soon.

Explore some of the paycheck advance apps you can use.

2. Personal loans

A personal loan works similarly to a cash advance in that you’re borrowing money from a lender. But you might find that some personal loans have lower interest rates and fees than cash advances.

Explore our list of the best personal loans.

3. Debit cards and emergency funds

If you’re holding an emergency fund in your bank account, consider dipping into it using your debit card. This could help you avoid the high costs of cash advances while also using your emergency fund for its intended purpose.

Learn what emergency fund size is a good size.

4. Cashing out credit card rewards

You might have a stockpile of credit card rewards if you use rewards cards for your everyday purchases. Depending on the card, you might be able to use your rewards for cash deposits or cash-related redemptions.

Check out our list of the best cashback credit cards to find a credit card offer that works for you.

5. Borrowing money from friends or family

This might not always be possible, but borrowing some cash from a friend or family member could make a lot more sense than using a cash advance. You might be able to avoid fees and interest charges or at least work out a better repayment plan with someone you know.

FAQs about credit card cash advances

Credit card cash advances: Bottom line

We don’t recommend using credit card cash advances because they can be a costly method of borrowing money. You’ll often be on the hook for high interest charges and cash advance fees.

Unless you need cash for an emergency, it’s likely better to stay away or look into alternatives. This includes using paycheck advance apps or emergency funds, taking out a personal loan, borrowing from a friend, or cashing out credit card rewards.

Explore our dedicated page to compare credit cards to find a rewards card that makes sense for you.

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