A cash advance is borrowing money directly from your credit card issuer, not making a purchase
When you use a credit card to buy something, the merchant processes the transaction and the card issuer pays them. A cash advance works differently: you withdraw actual cash from an ATM, bank teller, or convenience store using your credit card, and the issuer lends you that money directly. The cash goes into your pocket, not toward a purchase.
The card issuer treats a cash advance as a loan against your credit limit, separate from your regular purchases. This distinction matters because cash advances come with their own fees, interest rates, and repayment rules — all of which are usually worse than what you pay for regular purchases on the same card.
Key Takeaways
- A cash advance charges a separate fee (typically 3% to 5% of the amount withdrawn) on top of interest that starts accruing immediately, with no grace period like purchases have.
- The interest rate on cash advances is almost always higher than your card's purchase APR, sometimes by 5 percentage points or more.
- Cash advances count against your credit limit, so withdrawing $500 reduces the credit available for purchases by $500.
- You can get a cash advance at an ATM, bank branch, or convenience store, but each method may charge different fees.
How the fees and interest work
A cash advance triggers two separate charges. First, there is an upfront cash advance fee, which your card issuer charges when you withdraw the money. This fee is usually a percentage of the amount withdrawn — commonly 3%, 4%, or 5% — with a minimum dollar amount (often $3 to $10). If you withdraw $200 at a 4% fee, you pay $8 immediately. If you withdraw $1,000 at 5%, you pay $50.
Second, interest starts accruing right away. Unlike a regular purchase, which typically has a grace period (usually 21 to 25 days before interest kicks in), a cash advance begins charging interest the moment you withdraw it. The interest rate is the cash advance APR, which is almost always higher than your purchase APR. If your card offers a 15% APR on purchases, the cash advance APR might be 20%, 22%, or even higher. That rate is fixed in your card's terms and does not change based on your credit score or payment history.
The interest compounds daily. If you owe $1,000 in cash advances at a 22% APR, you are paying roughly $0.60 per day in interest (before the balance changes). The longer you carry the balance, the more interest accumulates.
Where you can get a cash advance
You have three main options for withdrawing a cash advance. An ATM is the most common method — you insert your card, enter your PIN, and withdraw cash. The ATM operator (your card issuer's bank, another bank, or an independent operator) may charge an ATM fee on top of your card issuer's cash advance fee. These ATM fees range from $2 to $5 per transaction.
A bank branch lets you ask a teller for a cash advance. You show your card and ID, and they give you cash. Bank branches typically do not charge an additional fee beyond what your card issuer charges, but you are limited to business hours and may need to visit a branch of your card issuer's bank to avoid ATM fees.
A convenience store or grocery store may offer cash advances at the checkout counter. These are often called "cash back" or "cash advance" options. The store charges a fee (usually $2 to $5) on top of your card issuer's fee. This route is fast but the most expensive because you pay both fees.
How a cash advance affects your credit limit and credit score
A cash advance reduces your available credit immediately. If your card has a $5,000 limit and you withdraw $500 in cash, your available credit drops to $4,500. You can still use the card for purchases, but only up to the remaining balance. This matters if you rely on your card for emergencies or regular spending.
A cash advance can also affect your credit score, though not directly. The withdrawal itself does not appear on your credit report as a separate item. However, if the cash advance pushes your credit utilization higher (the percentage of your total credit limit you are using), your score may drop slightly. For example, if you normally use 20% of your limit and a $500 cash advance pushes you to 30%, credit scoring models may view this as higher risk.
The real credit score risk comes if you cannot pay back the cash advance on time. Missed payments are reported to credit bureaus and can damage your score for years.
Cash advances versus balance transfers and personal loans
A balance transfer moves debt from one card to another, usually with a lower introductory rate (sometimes 0% for 6 to 21 months). Balance transfers charge a fee (typically 3% to 5%) but no ongoing interest during the promotional period. A cash advance charges a fee and interest from day one, making it much more expensive for borrowing money.
A personal loan from a bank or online lender usually has a lower interest rate than a cash advance, no daily compounding, and a fixed repayment schedule. If you need $1,000, a personal loan at 12% APR over 12 months costs less than a cash advance at 22% APR. Personal loans also do not reduce your credit card limit, so you keep that credit available for emergencies.
If you need cash, a personal loan or even a short-term line of credit from your bank is almost always cheaper than a cash advance. A cash advance should be a last resort when you have no other option.
When your card issuer may decline a cash advance
Your card issuer can refuse a cash advance even if you have available credit. This happens most often when your account is new (some issuers wait 30 to 90 days before allowing cash advances), when you have missed payments, or when your account is flagged for fraud. If your card is locked or suspended, you cannot get a cash advance.
Some card issuers also set a separate cash advance limit that is lower than your purchase limit. You might have a $5,000 credit limit but only a $1,000 cash advance limit. This limit is set by the issuer and may not be visible in your online account until you try to withdraw cash.
How to repay a cash advance
A cash advance is repaid like any other credit card balance — you make a payment toward it each month. However, your card issuer applies payments in a specific order. Most cards pay off purchases first, then cash advances. This means if you make a $200 payment and owe $100 in purchases and $150 in cash advances, the $200 goes toward the purchase first, leaving the cash advance balance untouched. The cash advance continues accruing interest while you pay down the purchase.
To pay off a cash advance faster, contact your card issuer and ask if you can direct a payment specifically to the cash advance balance. Some issuers allow this; others do not. If yours does not, the only way to prioritize the cash advance is to pay more than the minimum and ensure the extra payment covers the purchase balance first.
Frequently Asked Questions
Can I use a cash advance to pay another credit card?
Technically yes, but it is expensive. You pay the cash advance fee and interest on the money you withdraw, then use it to pay another card. You are essentially paying to move debt around. This only makes sense if the other card has a much higher interest rate and you have no other way to transfer the balance.
Does a cash advance show up on my credit report?
The cash advance itself does not appear as a separate line item. However, if you miss payments or carry a large balance, that shows up on your report. The withdrawal may also increase your credit utilization, which can affect your score temporarily.
What is the difference between a cash advance and a purchase?
A purchase is a transaction with a merchant; a cash advance is a direct loan of cash. Purchases have a grace period before interest starts; cash advances charge interest immediately. Cash advances also charge a separate upfront fee and usually have a higher interest rate.
Can I get a cash advance if I have a 0% APR offer?
No. The 0% offer applies only to purchases or balance transfers, depending on the card. Cash advances are charged the card's cash advance APR, which is separate and not covered by promotional rates.
What happens if I cannot pay back a cash advance?
Interest and fees continue to accumulate, and the balance grows. If you miss payments, the card issuer reports it to credit bureaus, which damages your credit score. The issuer may also increase your interest rate or close your account. You could face collection action if the debt goes unpaid long enough.