What Is a Cash Advance on a Credit Card?

A cash advance is a way to get actual cash from a credit card’s credit line. The main costs associated with this type of transaction are the card’s cash advance fee and cash advance APR, and interest begins accruing on a cash advance immediately. As a result, you should only take out a credit card cash advance in emergency situations.

The most common way to get a cash advance is to withdraw cash from your credit card at an ATM, just like you would with a debit card. When you use your credit card, however, the cash is pulled from your credit line instead of your bank account.

How Does a Cash Advance Work on a Credit Card?

A credit card cash advance works similarly to using a debit card to withdraw money, only instead of taking cash out of your bank account, you borrow from your credit card’s credit line. You can get a cash advance at an ATM or bank branch, or by using cash advance checks provided by your credit card issuer.

It’s important to note that cash advances come with expensive fees and interest, and the interest starts accruing right away, with no grace period. We’ll go into more detail on how to get a cash advance and how much it will cost in the following sections.

How to Get a Credit Card Cash Advance

You can get a credit card cash advance at an ATM, at a bank branch, or by check. Below, we’ll break down the steps for withdrawing money from an ATM, since it’s the easiest and most popular method.

1. Insert your credit card into the ATM.
2. Enter your PIN. If you don’t have a PIN yet, you’ll need to request one from your credit card company.
3. Choose the cash advance option.
4. Enter the amount you want to withdraw.

Once you’ve confirmed the transaction, make sure to take your cash and your card, and count the cash. You also might want to print a receipt so you have a more immediate reminder of what you’ve borrowed.

Other Ways to Get a Credit Card Cash Advance

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. You won’t need a PIN with this method, and the amount of cash you can take out will be subject to your account’s cash credit limit. Usually, the limit for cash advances will be significantly lower than your card’s total credit limit.

It’s worth noting that the branch doesn’t necessarily have to be from the same bank that issued your card. For example, if you have a Mastercard or Visa, you can typically get one from any bank that displays a Mastercard or Visa logo.

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. With this type of cash advance, you may or may not be subject to a lower cash credit limit, depending on the issuer.

Learn more about how to get a cash advance on a credit card.

Cash Advance Fees

Cash advance fees average about 4.03% of the amount withdrawn, according to WalletHub’s Credit Card Landscape Report. For example, if you get a $1,000 cash advance with the average credit card, you’d pay a cash advance fee of about $40.

Depending on which bank or credit union issues your card, they will use one of the three following methods to calculate your cash advance fee:

• Flat Fee: The same fee 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.
• Percentage: Some cards 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 be as high as $12.50.
• Combination: This is the most common fee structure. Many issuers charge either a minimum flat fee or a percentage of the amount withdrawn – whichever is higher. Let’s say the fee percentage is 5% and the minimum rate is $10. If you withdraw $50, you wouldn’t pay the percentage fee of $2.50. You would pay $10.

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 and $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.

Learn more about the costs associated with a cash advance.

How to Minimize Your Cash Advance Fees

Cash advance fees are very expensive, but there are few ways to avoid them entirely, such as having the right credit card or drawing from an emergency fund instead. Other strategies simply soften the blow on your wallet, like using ATMs that won’t charge service fees or withdrawing everything you need at once.

• Don’t take out cash advances. Although this is stating the obvious, it’s best to simply avoid these transactions altogether, since they are so expensive. That said, in emergency situations, you may not have any other choice.
• Get a credit card with no cash advance fee. Some credit cards don’t charge a cash advance fee, though they are few and far between.
• Withdraw everything you need at once. If you think you are going to need a cash advance for multiple things, don’t take out a bunch of smaller advances. Withdraw everything you need at once. You are likely to pay less in fees that way, since most issuers charge a minimum fee on every transaction.
• Use in-network ATMs. ATMs run by your bank or that are part of a larger network your bank belongs to may not charge you any sort of ATM fee. That can save you a couple dollars on your transaction.
• Have an emergency fund. Each month, set aside some money in an emergency fund as part of your budget. That way, if you’re in a dire situation, you’ll be able to dip into that fund, which you can access with a debit card, instead of relying on a credit card cash advance. Ideally, try to have at least six months of expenses in your emergency account.

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 24.48%. In contrast, the average APR for normal purchases among new credit card offers is 22.11%.

How Much Does a Cash Advance Cost on a Credit Card?

This table shows just how expensive borrowing $500 with a cash advance could be if you pay it off over the course of a year at an APR of 25%, with monthly payments of $50. It’s far more costly than you might imagine.

Reasons to Avoid Credit Card Cash Advances

1. Cash advances are very costly, ultimately causing you to pay much more money (through fees and interest rates) than you initially withdraw.
2. Cash advances are subject to a cash advance credit limit, which typically comprises only a fraction of your total credit line.
3. 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.
4. 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.
• 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.

Credit Card Cash Advance Alternatives

Now that we’ve talked about how to avoid needing to take out cash advances, let’s go over a few alternative ways to get money if you’re really in a financial pinch:

Personal loans

There are personal loan options for people of all credit levels, and you can usually borrow between $1,000 and $100,000+, with smaller amounts sometimes available. The caveat is that they might not offer immediate access to funds. Personal loans also typically come with origination fees when you open them, plus interest.

Charging purchases to your credit card

If your expense isn’t something you necessarily have to pay with cash, then just charge it to your credit card. The interest you’ll pay on a regular credit card purchase is usually far less than what you’ll owe on a cash advance. Plus, you may have an opportunity to pay it off interest-free before your due date if your grace period is active.

Friends and family

Borrowing money from friends or family can get cash in your hand quickly, and the person you borrow from may offer you low interest and flexible payment terms. At the same time, it’s best to draw up an agreement between the two of you and take it seriously, as failing to repay your loan can naturally hurt your relationship.

Pawn shops

You can sell an item you don’t need at a pawn shop, or pawn something valuable. When you pawn an item, you’ll get a portion of its value in cash. Then you’ll have a certain amount of time to pay the money back, usually with steep interest. If you don’t, the pawn shop can sell the item. We don’t recommend this option unless you have an item you really don’t care if you lose.

Apps

Some apps, such as Empower, EarnIn, Chime and Brigit, can lend you money in a pinch, but they usually require you to borrow against your next paycheck. These apps are more reliable and cheaper than so-called “payday loans,” but they still charge fees for the privilege, including monthly subscription fees in some cases.