What a cash advance is and why it costs more than a regular purchase
A cash advance is borrowing money directly from your credit card issuer, not from a merchant. You walk into an ATM or bank, hand over your card, and receive cash. The card company treats this as a loan to you, separate from your regular credit card balance.
The reason it costs more than a purchase is simple: the card company sees cash as riskier. When you buy something, the merchant absorbs some fraud risk. When you withdraw cash, there is no merchant—just you and the money. To cover that risk, card companies charge you fees and a higher interest rate than your regular purchase rate.
Most people use cash advances when they need physical money urgently and have no other way to get it. But because of the fees and interest, it is almost always the most expensive way to borrow on a credit card.
Key Takeaways
- A cash advance charges a fee (usually 3 to 5 percent of the amount) plus a higher interest rate than purchases, starting immediately with no grace period.
- You can get a cash advance at an ATM, bank teller, or sometimes through a convenience check, but each method has different fees.
- Interest on a cash advance begins accruing the day you withdraw it, not at the end of your billing cycle like a purchase.
- Paying off a cash advance is harder than paying off a purchase because card companies apply your payment to the lowest-interest balance first.
- A personal loan, payday loan, or even a balance transfer card are usually cheaper alternatives if you have time to explore them.
The fees you pay upfront
When you take a cash advance, you pay a cash advance fee immediately. This fee is a percentage of the amount you withdraw, typically between 3 and 5 percent. Some cards charge a flat minimum fee (like $5 or $10) if the percentage would be smaller.
If you withdraw $500, a 4 percent fee costs you $20 right away. That $20 is added to your balance. You do not pay it separately—it just becomes part of what you owe the card company.
A few cards marketed to people rebuilding credit or with limited credit history charge higher cash advance fees, sometimes 7 to 10 percent. Always check your card's terms before you take a cash advance. The fee is listed in your card agreement under "cash advance fee" or "cash advance terms."
The interest rate and how it starts immediately
Cash advances have their own interest rate, called the cash advance APR. This rate is almost always higher than your purchase APR—sometimes 5 to 10 percentage points higher. If your purchase rate is 18 percent, your cash advance rate might be 25 percent.
Unlike a purchase, there is no grace period. Interest starts accruing the moment you withdraw the cash. If you take out $500 on day one of your billing cycle, you are paying interest on that $500 for the entire month, even if you pay it back before your statement closes.
The interest is calculated daily. Each day, the card company multiplies your outstanding cash advance balance by the daily rate (your APR divided by 365) and adds that to what you owe. This compounds—meaning you pay interest on the interest—until the balance is gone.
Where you can get a cash advance and what each option costs
You have three main ways to access a cash advance:
- ATM withdrawal: Insert your card at any ATM and withdraw cash like a debit card. The ATM may charge you an out-of-network fee (usually $2 to $3) on top of your card's cash advance fee. Your card issuer's own ATMs typically do not charge this extra fee.
- Bank teller: Walk into a bank branch and ask the teller to withdraw cash against your credit card. There is usually no extra fee beyond your card's cash advance fee, but not all banks offer this service to credit cards—some only do it for debit cards.
- Convenience checks: Some card companies send you blank checks tied to your credit card account. You write a check to yourself or a payee, and it counts as a cash advance. These often have the same fee and APR as a regular cash advance, but some cards charge a different fee for checks.
The cheapest method is usually a bank teller at your card issuer's own bank, because you avoid the ATM operator fee. The most expensive is an out-of-network ATM, where you pay both the ATM fee and your card's cash advance fee.
Why paying off a cash advance is harder than paying off a purchase
When you have both a purchase balance and a cash advance balance on the same card, the card company applies your payment to whichever balance has the lowest interest rate first. Since your purchase rate is lower than your cash advance rate, your payment goes toward the purchase, not the cash advance.
This means your cash advance sits there accruing interest at the higher rate while you pay down the cheaper debt. If you owe $300 on a purchase (at 18 percent) and $200 on a cash advance (at 25 percent), and you send in a $100 payment, that $100 goes toward the $300 purchase. Your $200 cash advance keeps growing with interest.
To pay off a cash advance faster, you have to send extra payments beyond your minimum, or pay your entire statement balance plus the cash advance. Check your statement to see the breakdown of how much is purchase and how much is cash advance, then plan accordingly.
Cheaper alternatives if you have time to explore them
Before you take a cash advance, consider whether you have time for a cheaper option:
- Personal loan: If you have a bank account or credit union membership, you may be able to get a personal loan in one to three business days. The interest rate is usually lower than a cash advance APR, and there is no upfront fee.
- Balance transfer card: If you have decent credit, a new card with a 0 percent balance transfer offer might let you move debt from another card at little or no cost. This does not give you cash, but it can free up money elsewhere.
- Paycheck advance app: Some employers and third-party apps let you borrow against your next paycheck for a flat fee (usually $5 to $15). This is cheaper than a cash advance if you are paid within a week or two.
- Asking for a loan from family or friends: This is not always possible, but it is free and has no interest.
A cash advance should be a last resort, not a first choice. The fees and interest add up fast, and you start paying interest immediately.
How to read your statement and track what you owe
After you take a cash advance, your credit card statement will show it separately from your purchases. Look for a line item labeled "cash advance" or "cash advance balance." Next to it, you will see the amount, the interest rate (APR), and the interest charged that month.
Your statement will also show a minimum payment, but that minimum usually covers only interest and a tiny bit of principal. Paying only the minimum means your cash advance will take months or years to pay off.
To know exactly when your cash advance will be paid off, use the card issuer's online calculator or ask customer service. Tell them your balance, your APR, and how much you plan to pay each month. They can tell you the payoff date and total interest you will pay.
Frequently Asked Questions
Can I take a cash advance on a credit card I just opened?
Usually yes, but some card issuers restrict cash advances for new cardholders. Check your card agreement or call customer service to confirm. Even if you can take one immediately, the fees and interest are the same as for any other cardholder.
What happens if I do not pay back a cash advance?
The balance stays on your card and keeps accruing interest. If you miss payments, your credit score drops, and the card issuer may close your account or send the debt to a collection agency. The debt does not disappear.
Is there a limit to how much I can withdraw as a cash advance?
Yes. Your card issuer sets a cash advance limit, which is usually lower than your credit limit. You can find this limit in your card agreement or by calling customer service. Some cards set it at 20 to 30 percent of your credit limit.
Can I take a cash advance on a secured credit card?
Most secured cards allow cash advances, but the fees and APR are the same as unsecured cards. Because secured cards often have higher purchase APRs to begin with, the cash advance APR can be quite steep. Check your card terms before you take one.
Does a cash advance show up differently on my credit report?
No. A cash advance balance appears as part of your overall credit card balance on your credit report. What matters to your credit score is the total amount you owe and whether you pay on time—not whether it came from a purchase or a cash advance.