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Important things to know before getting a cash advance on your credit card
If you need money fast, look elsewhere first.
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.
Other transactions that may be processed as cash advances
In some cases, payments made with your credit card may be processed as cash advances even if they would normally be deemed as purchases. This usually happens at casinos. It’s possible that buying a drink at the casino could be processed as a cash advance.
If you’re planning on using your credit card at a casino, you should check with your credit card provider or the venue to find out if your payment will be considered a cash advance.
Downsides of a cash advance
Think twice before making a cash advance. Unless it’s absolutely necessary to use your credit card for a cash advance, you should avoid it. There are high costs and hardly any benefits besides having immediate cash in hand:
- Higher rate of interest.
Cash advance interest rates are always higher than purchase interest rates. - Additional fees. The cash advance fee is usually $10 or 5% of the total transaction cost. So if you withdrew $1,000 from an ATM, you would have to pay a fee of $50.
- No interest-free days.
You won’t find a grace period with your cash advance. You’ll accrue interest from the very day you make the transaction. - No points.
Cash advance transactions are ineligible to earn rewards or frequent flyer points. - Credit card payment allocation.
Credit card repayments are made to the debt that has the highest rate of interest first, usually a cash advance transaction if you go that route. - ATM fees.
ATM fees will add to the cash advance balance and the associated fees and interest charges. - Foreign currency transaction fees.
You could be charged for currency conversion if you use your credit card to get cash out at an overseas ATM, adding to the overall cost of the cash advance. - Lower limit.
Some credit cards limit the amount of cash you can take out as an advance. For example, even if your credit limit is $8,000, you might only be allowed to take out $500 in cash.
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.
What type of transactions are considered cash advances?
The most common type of cash advance is a simple cash withdrawal from your ATM using your credit card. Depending on your credit card, a cash advance could include other transactions as well, such as online transfers or gambling transactions. Learn more about which transactions are considered cash advances.
When does a cash advance make sense?
Put simply, a cash advance rarely “makes sense.” Given the severity of the fees and interest, you should view a cash advance as an absolute last resort for when you need cash.
If you need to make a cash advance, try to do so only when you know you can quickly pay off the debt. A cash advance might also prove slightly less damaging if your credit card doesn’t charge an advance fee. Otherwise, stick to one of the options below.
Alternatives to a cash advance
If you need cash quickly, consider one of the following options before turning to a cash advance:
- Short-term loans.
Consider a short-term cash loan also known as a “payday loan.” While most lenders have a fast turnaround time, you’ll be subject to high interest rates. - Personal loan.
A personal loan is usually more affordable than a credit card cash advance or short-term loan. Getting approved can take no longer than a few minutes, but it can take a few days or longer to get the funds. If you can wait and are approved for a personal loan, funds will be deposited into your checking account and you’ll skip the cash advance fees. - Debit card.
The most affordable option is to use a debit card as they can offer fee-free withdrawals when you use the bank’s associated network. Even if you overdraw on your checking account, you won’t need to pay interest on the overdrawn amount. - Ask a friend or family member.
Though you might not feel great about borrowing money from someone, it can prove the most prudent option when it comes to your finances.
ON THE ROAD AND OVERSEAS EDITION: DID YOU KNOW?
If you’re traveling, you could also consider a prepaid travel money card to avoid foreign currency conversion fees and other ATM charges.
Our pick for a cash advance credit card
Compare cash advance credit cards
Updated November 19th, 2019
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Bottom line
With high rates and fees, credit card cash advances are almost always an expensive option. But if you really need to use a credit card for cash withdrawals or other cash advance transactions, make sure you use a low cash advance rate credit card and consider other options so that you can keep your costs to a minimum.
Back to topIf you know you will need some extra cash in the future, plan ahead and apply for an affordable personal loan. It can take a little longer to apply, but the interest rates are generally lower than those of credit cards.
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