A cash advance on a credit card can provide quick access to money when you cannot use your card for a purchase. However, this convenience usually comes with a separate fee and interest that starts accruing right away, making it important to check the cost before withdrawing cash.
The decision comes down to the reason for the withdrawal, how quickly you can repay it and whether another borrowing option would cost less.
What Is a Credit Card Cash Advance?
A cash advance allows you to borrow cash using your available credit.
The most common method is withdrawing money from an ATM, but some issuers also allow other forms of cash advances, such as convenience checks or certain transactions treated as cash equivalents. The exact rules depend on the card issuer.
Your card may have:
- a regular credit limit;
- a separate cash advance limit;
- a cash advance APR;
- a transaction fee.
These terms should appear in your card agreement or account information.
How Does It Work?
The process is usually straightforward:
- Check your available cash advance limit.
- Use an approved method, such as an ATM.
- Withdraw the amount you need.
- Pay any applicable transaction fee.
- Repay the balance through your credit card.
The amount borrowed becomes part of your credit card balance. However, it may be subject to different interest terms than your regular purchases.
How Much Does It Cost?
The total cost generally comes from two sources: the cash advance fee and interest.
The fee may be a percentage of the withdrawal, a fixed amount or whichever is greater, depending on the card. An ATM operator may also charge a separate fee.
The APR for cash advances can also differ from the rate applied to purchases.
For example, suppose a card charges a 5% fee with a $10 minimum:
| Amount withdrawn | Example fee |
|---|---|
| $100 | $10 |
| $200 | $10 |
| $500 | $25 |
| $1,000 | $50 |
These figures are only examples. Your card’s actual fee may be different.
When Does Interest Start?
This is one of the biggest differences between cash advances and regular purchases.
Cash advances generally begin accruing interest from the transaction date. They usually do not receive the grace period that may apply to purchases.
That means waiting until your normal statement due date does not necessarily prevent interest from accumulating.
For that reason, the length of time you carry the balance matters considerably.
Cash Advance vs. Regular Purchase
Although both transactions use your credit card, their costs can be different.
| Feature | Cash advance | Regular purchase |
|---|---|---|
| Uses available credit | Yes | Yes |
| Separate APR may apply | Yes | Yes |
| Interest generally starts immediately | Yes | Usually not when a grace period applies |
| Transaction fee | Often | Usually no |
| Separate cash limit | Often | Usually no |
A purchase can therefore be less expensive when you can pay it within the card’s grace period.
Example of the Total Cost
Suppose you withdraw $500 and your card charges a 5% cash advance fee.
The initial fee would be:
$500 × 5% = $25
Now assume the applicable APR is 30% and you keep the balance for about one month.
A simplified estimate of the interest would be:
$500 × 30% ÷ 12 = $12.50
The approximate cost would therefore be:
$25 fee + $12.50 interest = $37.50
This is only an illustration. Credit card interest is generally calculated using a daily periodic rate, so the actual amount can differ.
When Does a Cash Advance Make Sense?
A cash advance on a credit card may make sense when you have a short-term need and can repay the balance quickly.
It may be worth considering if:
- you need cash immediately;
- the expense cannot be paid by card;
- you have no significantly cheaper option;
- you know exactly what the transaction will cost;
- you can repay the balance soon.
The shorter the repayment period, the less time there is for interest to accumulate.
When Should You Avoid One?
This type of borrowing becomes harder to justify when it is being used to cover recurring expenses or an existing debt problem.
Be particularly cautious if you:
- need the money for everyday bills;
- are already carrying a large card balance;
- plan to make only minimum payments;
- are using one debt to pay another;
- expect to need several months to repay the amount.
A quick withdrawal can become a long-term balance if your budget does not allow you to pay it down.
What Are the Alternatives?
Before withdrawing cash, compare the cost with other ways of covering the expense.
Personal loan
A personal loan may offer a fixed repayment schedule and, depending on your credit profile, a lower borrowing cost.
Credit union loan
If you belong to a credit union, check whether it offers a small personal loan or emergency borrowing option.
Payment arrangement
If the money is needed for a bill, ask the company whether it offers a payment plan or extension.
Emergency savings
Using savings may be cheaper than taking on high-cost credit, as long as you do not leave yourself without funds for future emergencies.
The right alternative depends on the amount needed, repayment period and rates available to you.
Does It Affect Your Credit Score?
The withdrawal itself does not automatically count as a negative item on your credit report.
However, it increases your credit card balance. If that pushes your credit utilization higher, it can affect your credit score depending on the scoring model.
For example, someone with a $5,000 credit limit who adds a $1,000 cash advance is using a larger portion of their available credit.
Paying down the balance can reduce that utilization over time.
What Is a Cash Advance Limit?
Your cash advance limit is the maximum amount your card allows you to withdraw as cash.
It can be considerably lower than your total credit limit.
For example:
Total credit limit: $5,000
Cash advance limit: $1,500
Having $5,000 in available credit would not mean you could withdraw the entire amount as cash.
Your statement or online account should show the applicable cash limit.
How to Keep the Cost Down
If you decide to use this type of borrowing, a few steps can limit the expense.
Check the fee first. Know whether it is a percentage, fixed amount or minimum charge.
Look at the cash advance APR. Do not assume it is the same as your purchase APR.
Withdraw only what you need. A larger balance generally means more interest.
Repay it as soon as possible. Since interest usually starts immediately, reducing the balance sooner can lower the total cost.
Avoid unnecessary new charges. Adding purchases while repaying the advance can make it harder to bring down the overall balance.
What Should You Check Before Withdrawing Cash?
Read the terms for your specific card and look for:
- cash advance APR;
- transaction fee;
- minimum fee;
- cash advance limit;
- ATM charges;
- payment terms;
- interest calculation method.
The CFPB recommends checking your card agreement and statement for the applicable rates and fees.
These details are more useful than relying on a general estimate because credit card terms vary by issuer and product.
Cash Advance vs. Payday Loan
Both can provide quick access to money, but their costs work differently.
A payday loan typically has a short repayment period and can carry a very high APR. A cash advance also tends to be expensive because of its fee and immediate interest.
If you are comparing the two, calculate the total amount you would repay, rather than looking only at the amount you receive upfront.
The CFPB recommends using APR when comparing borrowing costs.
The Bottom Line
A cash advance on a credit card is mainly a short-term borrowing tool, not a low-cost way to access money.
It can be reasonable for an urgent expense when you can repay the balance quickly and alternatives are more expensive or unavailable. If you expect to carry the debt, compare personal loans, credit union products and other options before making the withdrawal.
The most important numbers are the cash advance APR, upfront fee and amount of time you expect to need the money.
Frequently Asked Questions
Can I get cash from my credit card at an ATM?
Yes, if your issuer allows cash advances. You may need a PIN, and the transaction can involve both a cash advance fee and an ATM fee.
Does a cash advance have a grace period?
Generally, no. Interest typically begins accruing on the transaction date.
Is the cash advance APR the same as my purchase APR?
Not necessarily. Credit cards can have different APRs for purchases, cash advances and other types of balances.
Can I repay a cash advance immediately?
Yes. Paying the balance sooner can reduce the interest that accumulates, although an initial transaction fee generally remains.
Can I withdraw my entire credit limit as cash?
Usually not. Many cards have a separate cash advance limit that is lower than the overall credit limit.
Can a cash advance lower my credit score?
It can indirectly affect your score if the additional balance increases your credit utilization significantly.
Is a cash advance a good option for an emergency?
It can be an option for a genuine short-term emergency, but compare its total cost with other available forms of borrowing first.
Where can I find my cash advance rate?
Check your latest statement or cardholder agreement. Your issuer should provide the applicable APR and fee information for cash advances.