Everything you need to know about credit card cash advances.
Did you know you can use your credit card for a cash advance? Well you can. It can include getting money from an ATM, buying gift cards, getting foreign currency and some companies even consider utility bill payments as cash advance transactions.
Convenient? Yes. Expensive? It can be. There are high interest rates attached to this transaction and we haven’t even told you about the cash advance fee you’ll have to pay, typically around 5% of the total transaction. That doesn’t mean that there aren’t options out there, you can always read about and compare low cash advance rate credit cards to save on fees.
In addition to the key details of cash advances, we’re going to point out what you should consider before using your card and other options you can look into to.
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What type of transactions are considered cash advances?
Depending on your credit card, a cash advance could include any or all of the following types of transactions:
- ATM withdrawals. Getting cash from an ATM using your credit card.
- Balance transfers. Some balance transfer credit cards revert to the cash advance rate.
- Gambling transactions. Whether it’s online or at the casino, gambling purchases can be considered a transaction that fall victim to cash advance rates and fees.
- Foreign currency and traveler’s checks. Since they are a form of cash, if you purchase them with your credit card, it is considered a cash advance.
- Paying for gift cards or prepaid cards. Buying a gift card or prepaid card is usually classified as a cash advance. This also applies when reloading prepaid credit, debit or store cards with your credit card.
- Online transfers. If “credit” from your card is being converted into cash that is going into your checking account —you guessed it— it’s a cash advance.
- Utilities. Using your credit card to pay utility bills is often seen as a cash advance.
- Government charges. If you pay a government fee with a credit card, it could be processed as a cash advance.
What credit card transactions are considered cash advances?
What to consider before using your credit card to make a cash advance
Think twice. Unless it’s absolutely necessary to use your credit card for a cash advance, 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. Cash advances accrue interest from the day the transaction is made.
- 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.
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 much does a cash advance cost?
If I don’t want to use a credit card for a cash advance, how else can I get money fast?
These options can get you cash quickly.
- 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 to push the paper to get you the funds can take a few days or longer. 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.
If you’re traveling, you could also consider a prepaid travel money card to avoid foreign currency conversion fees and other ATM charges.
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.
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