Credit Card Cash Advance: Fees, APR, How to Get & More
A credit card cash advance is a way to get cash from a credit card’s credit line. The main costs associated with a credit card cash advance are the card’s cash advance fee and cash advance APR. Unlike credit card purchases, credit card cash advances are not subject to the card’s grace period. That means interest begins accruing on a cash advance immediately. As a result, a credit card cash advance should be done only in emergency situations.
Types of Credit Card Cash Advances:
There are three types of credit card cash advances. The first and most common type occurs when you treat your credit card like a debit card, using it to withdraw cash from an ATM. This form of cash advance is subject to a cash credit limit, which typically comprises only a fraction of your total credit line. Both your cash credit limit and the PIN needed to make a cash advance at an ATM can be found by calling your credit card company.
Another way to get a cash advance is by going into a bank branch and presenting your card and photo ID to a teller to get cash. You won’t need a PIN with this method, and the amount of cash back you can take out will be subject to the same cash credit limit.
The third type of cash advance also allows you to tap into your credit line, but instead of withdrawing cash, you use your credit card to write checks or transfer money into a bank account. With this type of cash advance, you may or may not be subject to a lower cash credit limit, depending on the issuer.
Below, you can learn the basics of how to get a credit card cash advance, as well as what fees and APRs you can expect to pay. You’ll also find helpful tips on how to avoid these costly transactions altogether.
How to Get a Credit Card Cash Advance
There are several ways you can get a credit card cash advance, each of which requires different steps.
From an ATM: Insert your credit card and enter your PIN. Choose the cash advance option and enter the amount you want to withdraw. If you don’t have a PIN yet, you’ll need to request one from your credit card company.
At a bank branch: Present your credit card and a government-issued photo ID to the bank teller, and tell them how much money you wish to borrow.
With a cash advance check: Your issuer may send you these checks automatically or you may have to request one. You can write the check out to yourself or someone else and once it processes, the transaction will appear on your credit card statement.
Cash Advance Fees
Out of all the credit card fees, cash advance fees are some of the most exorbitant. Many cardholders aren’t aware of just how expensive the transactions are, and end up paying the price when their credit card bill arrives a few weeks later with an additional $10 to $50 tacked on in fees.
Depending on which bank issues your card, they will use one of the three following methods to calculate your cash advance fee.
How a Cash Advance Fee is Determined:
- The first method is a flat rate fee that will be assessed no matter how much money you withdraw. For many banks, this charge tends to hover around $10. Therefore, if you withdraw $250, you will have to pay $260.
- The second method is to charge a percentage of the money you withdraw, usually between 2% and 5%, as a fee. In this scenario, if you withdraw $250, your fee could reach as high as $12.50.
- The third method, which is the most common, is a combination of the first two. Many issuers charge either a minimum flat rate or a percentage of the amount withdrawn – whichever is higher. Let’s say the fee percentage was 5% and the minimum rate was $10. If you withdrew $50, you wouldn’t pay a percentage fee of $2.50. You would pay $10.
Cash advance fees have been falling over the last few years. According to WalletHub’s latest Credit Card Landscape Report, the average cash advance fee is now the greater of 3.28% or $7.48.
It is also important to note that if you get a cash advance at an ATM, you may pay an ATM owner surcharge in addition to the cash advance fee and high interest rates charged by your credit card. These fees range between $2-$5, and though they are the lowest of the ones we’ve discussed, they can still add up. Your credit card issuer will likely have a network of ATMs that do not charge owner surcharges. But on some occasions you may be forced to use an ATM outside of that network.
Cash Advance APR
In addition to expensive cash advance fees, there are also high cash advance APRs. From the moment you withdraw money – whether in cash from an ATM, through a check, or by transferring money to a deposit account – your credit card company will immediately begin assessing interest.
Unlike purchases you make on your credit card, cash advances typically lack a ‘grace-period’ for accruing interest. What’s more, the APR for cash advances is almost always higher than the APR for regular credit card purchases. Cash advance APRs can be as high as 36%, with a current average of 21.2%. In contrast, the average regular credit card APR for new offers is 19.02, and it’s 14.87% for all existing accounts.
Reasons to Avoid Credit Card Cash Advances
- Cash advances are very costly, ultimately causing you to pay much more money (through fees and interest rates) than you initially withdraw.
- Doing a cash advance because you are short on money can create a vicious cycle of borrowing for immediate needs. That could ultimately spiral down to payday loans and other unfavorable borrowing options.
- They do not look good in the eyes of your creditor. Taking out a cash advance signifies financial desperation and hazard. They make you look more like a high-risk customer.
As a result, we recommend taking measures to ensure that you will never need to make a cash advance. We’ll give you some tips for doing so in the section below.
How to Avoid Cash Advances
- Exhaust Other Options First: Is there a way you can use your credit card instead? You can avoid an over-the-top interest rate and fee if you make the purchase directly through your credit card. Alternatively, see if a friend or relative will lend you money on short notice.
- Create a Budget: Personal budgeting is one of the biggest parts of financial management. Keep track of your income and expenses so you can gauge your progress. Cut down on unnecessary purchases and devote your saved money to establishing an emergency fund. Then, if you ever need a cash advance, you can just turn to your emergency fund instead.
- Open a Cash Account: Having either a checking account or a prepaid card that gives you access to free withdrawals at a large ATM network is one of the best ways to avoid cash advances. Making sure you always have some money in your account will enable you to access cash in emergency situations without incurring unnecessary expenses.
- Cut Your Losses: One of the most frequent places in which cash advances are made is the casino. Casinos have tons of ATMs, after all, in addition to many people who are laying their last dollar on the line. The best advice in such a situation is obviously to resist the cash advance and call the session quits. You don’t need to make it back the same way, and perhaps today is just not your day.
- Just Wait: You should only get cash advances in emergencies due to their costly nature and their negative impact on your credit reputation. If your purchase is not for an emergency, your best alternative is simply to wait until you can acquire cash through some other means. Plus, most emergencies, especially those that are health oriented, are payable via credit cards. So if you’re in a situation where you need cash, pause to think about whether you truly need it now.
- Avoid Issuer Overtures: Credit card companies will often mail checks to customers who have not used their cards in a while as a means of spurring renewed account activity. Before using these checks, make sure you’re clear about the fees and interest that comes with them. They are considered to be cash advances in a lot of cases.
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