Getting a cash advance on a business credit card

It's usually only recommended as a last resort, but if you do want to get a cash advance on a business credit card, there are right and wrong ways of going about it.

Using your company credit card to withdraw cash is known as a “cash advance”, and it’s generally a bad idea. That’s because card issuers usually charge a cash advance fee of around 3%. They’ll also sometimes charge a higher rate of interest on this part of your balance, and your usual interest-free grace period on purchases won’t apply.

The term “cash advance” usually applies to any credit-for-cash transaction, along with the corresponding interest rates. This includes merchant cash advances, like when you ask for cashback when paying for purchases. (Many retailers won’t provide cashback if you’re paying with a credit card in any case.)

Nevertheless, a business credit card cash advance is sometimes unavoidable if you need to get hold of cash for business expenses, perhaps if you’re having cash flow difficulties and need to pay a supplier. Some cards offer better facilities to do this than others.

How to complete a business credit card cash advance sensibly

The first step is to evaluate if there are any alternative ways of getting your hands on the cash needed. If you withdraw cash from a current account (without going overdrawn), you won’t be charged interest. If there are no funds in your current account, a business credit card money transfer may work out cheaper (more on these below).

If there are no alternatives, you should select the cheapest form of cash advance for your card (although you’ll usually be charged the same for ATM withdrawals and cashback transactions).

Once the transaction has been made, you will be charged your first interest payment, and a one-off fee if applicable. You’ll then be charged interest again every day, until the amount withdrawn is paid back onto your account. To avoid this you’d ideally aim to pay the money back on the same day you made the cash advance.

How do business credit card money transfers work?

In this context, a “money transfer” is the transfer of funds from your credit card to your current account.

Not all credit cards allow this. If it is allowed, the interest rate may be higher than for a “balance transfer” (a transfer of funds between two credit cards). Once again, a one-off fee will usually be involved.

It may be possible to arrange a money transfer from your credit card using your Internet banking or your bank’s mobile app. Failing that, you can get in touch with your credit card provider. The process will complete as quickly as a traditional bank transfer.

The good news is that some business credit cards out there will let you transfer funds to other accounts without charging you the one-off fee. These cards operate more like flexible, ongoing line-of-credit business loans that just happen to come with a card.

If you can get your hands on one of these, it may be a good bet. If you’re in a hurry, since you don’t actually need to use the card to make a money transfer, you can use it before it’s even been delivered.

Dos and don’ts

Do

  • Consider a credit card with low or even no charges for money transfers.
  • Pay off your balance that day, or as soon as possible.
  • Take a closer look at the rates and fees of any card you’re considering using.
  • Consider alternative forms of getting cash.

Don’t

  • Opt for an expensive business credit card cash advance unless it’s an emergency.
  • Withdraw more than you can afford to pay back.

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Frequently asked questions

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