In addition to allowing you to make purchases or transfer a balance from another credit card, your credit card may come with the ability to get cash. You might consider taking a cash advance from your card if you’re shopping with a business that only takes cash or if you’re in a pinch and don’t have enough money in your bank account. Before you go that route, know that it’s one of the most expensive credit card transactions you can make.
What Is a Cash Advance?
A cash advance on your credit card is an amount of cash borrowed against your credit limit. It’s like withdrawing money from the ATM with your debit card, except the cash comes from your credit limit rather than your bank account balance. That means you have to pay it back with interest. Cash advance transactions can be performed by using your PIN at an ATM or by using a convenience check mailed by your credit card issuer.
Although the names are similar, credit card cash advance is a little different from a payday cash advance loan with a payday loan lender taken. The payday cash advance generally doesn’t require a traditional credit check and must be repaid directly to the payday lender, usually by your next payday.
Your credit card cash advance is tied to your credit card (which requires that your credit check was approved) and comes with the option to pay over a period of time as long as you make minimum payments.
How Much Cash Can You Withdraw?
You can withdraw cash up to your cash advance limit, which may be lower than the credit limit you’re given for purchases.
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Check a recent copy of your credit card statement or log in to your online account to check your cash advance limit and the amount of credit you have available for a cash advance.
Your available cash advance limit may be lower than your total limit if you already have a balance on the credit card.
Cost of a Cash Advance
Cash advances have a higher cost than regular transactions. You’ll be charged a cash advance fee and, usually, a higher interest rate than you’d pay for purchases. The cash advance fee can be charged as a percentage of the cash advance or a flat rate. For example, your credit card issuer may charge a fee of 5% of the advance or $10, whichever is greater. Check your credit card terms to confirm the exact fee you’ll pay for cash advances.
Cash advances don’t have a grace period, so interest begins accruing on the balance as soon as the transaction is completed. This is true even when you pay your balance in full and start the billing cycle with a zero balance. You’ll always pay a finance charge on a cash advance even if you pay it in full when your billing statement comes. To reduce the amount of interest you pay on a cash advance, pay it off as soon as possible, even if that means paying before your billing statement comes.
In addition to the cash advance fee, you’ll be charged an ATM fee when you use an ATM for a credit card cash advance.
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There are some creative ways to get cash from a credit card without doing a cash advance. Consider reselling gift cards or shifting some bills around.
Paying Off to Cash Advance Balance
When your card’s cash advances carry a different interest rate from purchases or balance transfers, your monthly payment may be split up among the balances, depending on how much you pay. If you only make the minimum payment, it will likely be applied to the balance with the lowest interest rate—that’s up to your credit card issuer.
The payment amount above the minimum will be applied to the balance with the highest interest rate, which is likely your cash advance balance. If you’re carrying multiple balances, you’ll have to pay more than the minimum if you want to reduce the cash advance balance quickly.
When a Cash Advance Isn’t Cash
Some transactions are treated as a cash advance even though you never physically withdraw cash on your credit card. For example, if your credit card is set up for overdraft protection, the overdraft amount will be treated as a cash advance. Wire transfers, money orders, and cryptocurrency purchased with your credit card may also be considered cash advances. Refer to your credit card agreement to figure out which transactions may be treated as cash advances.
Frequently Asked Questions (FAQs)
What’s the best credit card for a cash advance?
LendingTree tagged six cards in May 2022 that stand out above the rest. They have no cash advance fees and charge reasonable annual percentage rates (APRs). They’re all offered by just two lenders: Digital Federal Credit Union and Pentagon Federal Credit Union. You can roll up your sleeves and compare APRs and fees if neither of these lenders is available to you.
Is there any way to avoid a cash advance fee?
It’s almost impossible to dodge a cash advance fee if you make this type of transaction, but you might be able to keep these fees to a minimum if you withdraw less cash and/or pay back the withdrawal as soon as possible before a lot of interest can begin accruing.