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Cash advances — which let you “borrow” money from your credit card account — are a unique way to get cash when you need it quick. While convenient, cash advances can prove incredibly pricey beyond the money you borrow from your account. That’s because they come with high interest rates and fees. It is possible to get a low cash advance rate, but strongly consider alternatives before getting a cash advance.
How much could a cash advance cost?
Let’s say you’re at a festival and want to use your credit card to get cash out. Your card applies the following fees and charges:
- ATM withdrawal fee: $3
- Cash advance fee: The greater of $10 or 5% of the total transaction cost.
- Cash advance interest rate: 21.99% APR
If you withdrew $500 on the first day of the festival, your initial costs would be:
- ATM withdrawal fee: $3
- Cash advance fee: $25
- Total: $528
This would start accruing interest at the rate of 21.99% APR from the day you made the withdrawal.
How to calculate the total cost of my cash advance
The math for calculating your cash advance costs is straightforward. You just add the fees and interest to your cash advance amount to get the total cost. Here are the fees and interest that add up to your cash withdrawal amount:
- Cash advance APR. This is the interest rate you start to accrue from the day you make your transaction. This is often the highest credit card interest rate and it’s usually above 25%. The exception here are cards issued by credit unions. Some of these cards have a 0% intro APR period on cash advances, but they all have a low APR between 9% and 18%.
- Cash advance fee. This is the fee you pay as you make your cash advance transaction. The most common fee you’ll find is between 3% and 5% of the amount. Some cards issued by credit unions completely waive this fee.
- ATM fees. If you’re making a cash withdrawal from an ATM, expect to pay a fee of around $3 per withdrawal. Usually, you can avoid this fee if you withdraw your money from an ATM of your card issuer.
How to calculate cash advance interest?
Suppose your cash advance APR is 26%. This is a yearly interest rate, meaning every day you’ll accrue less than 0.1% interest. Let’s say you’re making a $500 cash withdrawal and you want to pay it off in 30 days. Here’s how the math goes:
26 percent / 365 days = 0.0712 x $500 x 30 days = 1,068/100 percent = $10.68
In this example, you would pay $10.68 interest for a $500 cash withdrawal if you paid it off after 30 days.
Is a cash advance ever a good idea?
Let’s face it — cash advances can be expensive. However, sometimes you can’t avoid it; You just need the money.
If you have a debit card, try to use it instead. You will avoid the cash advance fee and the cash advance APR right off the bat. But if that’s not an option, calculate the costs of making a cash advance and make a repayment plan.
Compare cash advance credit cards
If you really need to use a credit card for cash withdrawals or other cash advance transactions, these cards offer relatively low fees or APRs.
Updated January 22nd, 2020
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Ask an Expert
I used my cr. card for a cash advance back in 2012.Capital one now say that I owe $2900.00 for a $500.00 advance.This advance was the limit on this card.I always paid more toward my payment each month.Now they have transferred my entire purchasing balance over to the advance status of $2900.00 I have never missed a payment. Can they do this and tell me I have paid off my purchasing balance all this is cash advance? What illegal term is used for this type of Practice? Thank you
Hi Jade,
Thank you for your comment.
Cash advance transactions on a credit card can be expensive. There could be a high interest rate for this kind of transaction and you must be aware about the cash advance fee you’ll have to pay, typically around 5% of the total transaction.
I understand how frustrating this has become. You would be best to contact your credit card issuer and ask for your credit card transaction details to see the payments you’ve done (and all the transactions made).
Regards,
Jhezelyn