A cash advance is borrowing money directly from your credit card issuer, not from a merchant or ATM owner

When you take a cash advance on a credit card, you are withdrawing cash using your card's credit line. You go to an ATM, a bank branch, or sometimes a convenience store, insert your card, and withdraw money the same way you would from a debit card. The difference is that the money comes from your credit card balance, not a bank account you own. The issuer treats this as a loan to you, separate from your regular purchase balance.

The cash appears in your hand immediately. The debt appears on your credit card statement within one to three business days. You then owe that amount back to the issuer, just as you would owe a purchase balance — but the terms are much worse. Cash advances carry higher interest rates, start accruing interest immediately with no grace period, and often include an upfront fee.

Key Takeaways

  • Cash advances charge a fee (usually 3 to 5 percent of the amount withdrawn) and a higher interest rate than purchases, often 5 to 10 percentage points above your purchase APR.
  • Interest on a cash advance begins accruing the day you withdraw it, with no grace period, so even a small advance costs money if you carry it for a month.
  • When you make a payment to your card, the issuer applies it to your lowest-interest balance first, meaning cash advance debt stays on your card longer.
  • You can avoid cash advances by using a debit card, a personal loan, or a balance transfer card if you need emergency cash.

How the fee and interest rate work

A cash advance fee is charged the moment you withdraw the money. Most issuers charge either a flat dollar amount (typically $5 to $10) or a percentage of the amount withdrawn, usually 3 to 5 percent. If you withdraw $500, a 4 percent fee costs you $20 upfront. This fee is added to your balance immediately.

The cash advance APR is the interest rate applied to the balance. It is almost always higher than your purchase APR. If your purchase rate is 18 percent, your cash advance rate might be 23 or 28 percent. This rate varies by issuer and your creditworthiness, but you can find it in your card's terms or by calling the issuer's customer service line. The rate is fixed for the life of that cash advance balance.

Interest begins accruing the day you withdraw the cash. Unlike purchases, which have a grace period (usually 21 to 25 days before interest charges begin), cash advances have no grace period. If you withdraw $500 on the 1st of the month and pay it back on the 30th, you owe interest for all 30 days, even if you pay in full.

How payment allocation works against you

When you have both a purchase balance and a cash advance balance on the same card, your payment goes to the lowest-interest balance first. Since your purchase APR is lower than your cash advance APR, your payment reduces the purchase balance, leaving the cash advance to accrue interest longer.

Example: You have a $1,000 purchase balance at 18 percent APR and a $500 cash advance at 25 percent APR. You make a $300 payment. The issuer applies all $300 to the purchase balance, leaving the $500 cash advance untouched. The cash advance continues accruing interest at 25 percent while you pay down the cheaper debt. To pay off the cash advance faster, you must make a payment large enough to clear the purchase balance first, then attack the cash advance separately.

This is why cash advances are expensive even for short periods. A $500 cash advance at 25 percent APR costs roughly $10 per month in interest alone, before the upfront fee. If you carry it for three months, you have paid $30 in interest plus the original fee.

Where you can take a cash advance

You can withdraw a cash advance at any ATM that displays your card network's logo (Visa, Mastercard, American Express, Discover). You can also visit a bank branch that accepts your card and ask the teller for a cash advance. Some convenience stores and check-cashing locations offer cash advances, though they may charge an additional fee on top of your issuer's fee.

There is usually a daily limit on how much you can withdraw. This limit is separate from your credit limit and is often lower — sometimes $500 to $1,000 per day, depending on your card and issuer. You can call customer service to ask what your cash advance limit is before you attempt a withdrawal.

Why issuers offer cash advances and why you should avoid them

Issuers offer cash advances because they are profitable. The fee and high interest rate generate revenue quickly, especially from people who need cash urgently and do not compare the cost to alternatives. For the issuer, a cash advance is a low-risk loan because it is secured by your credit line.

For you, a cash advance should be a last resort. The cost is high, the interest starts immediately, and the payment structure works against you. If you need cash, consider these alternatives first: withdrawing from your own bank account using a debit card, taking out a personal loan from a bank or credit union (which typically charges 6 to 36 percent APR, lower than most cash advance rates), or using a balance transfer card if you have time to apply and wait for approval.

What happens if you cannot pay back a cash advance

If you carry a cash advance balance and make only the minimum payment, the balance shrinks slowly because most of your payment goes toward interest. A $500 cash advance at 25 percent APR with a minimum payment of 2 percent of your balance takes roughly 30 months to pay off, and you pay over $200 in interest.

If you miss a payment on a cash advance, the same consequences apply as a missed purchase payment: your account may be reported to the credit bureaus, your credit score may drop, and the issuer may charge a late fee and raise your APR. The cash advance balance remains on your card and continues accruing interest until you pay it off or the account is closed.

Cash advances and your credit report

A cash advance does not appear separately on your credit report. It is part of your overall credit card balance and is reported as revolving debt. However, a large cash advance can increase your credit utilization ratio (the percentage of your available credit you are using), which can lower your credit score temporarily.

If you miss a payment or default on a cash advance, that negative mark appears on your credit report as a missed payment on that card, not as a separate cash advance default. The damage to your score is the same as missing a purchase payment.

Frequently Asked Questions

Can I take a cash advance if my credit card is maxed out?

No. A cash advance uses your available credit, so you must have room on your card. If your credit limit is $5,000 and your balance is $5,000, you cannot take a cash advance. You would need to pay down the balance first or request a credit limit increase.

Do I have to use a PIN to take a cash advance?

At most ATMs, yes. You need a PIN to withdraw cash. If you do not have one, call your issuer to set one up before you attempt a withdrawal. At a bank branch, you can usually show your ID instead of using a PIN.

What is the difference between a cash advance and a balance transfer?

A balance transfer moves debt from one card to another and typically has a lower APR for a promotional period (0 to 21 percent for 6 to 21 months, depending on the card). A cash advance withdraws cash and charges a high APR immediately. Balance transfers are cheaper if you need to move existing debt; cash advances are for getting cash in hand.

Will taking a cash advance hurt my credit score?

Taking a cash advance itself does not hurt your score, but it increases your credit utilization, which may lower your score slightly. Missing a payment on the cash advance will damage your score. Paying it off quickly has no negative effect.

Can I take a cash advance from a credit card I just opened?

Usually yes, as long as you have available credit. Some issuers restrict cash advances for new accounts for the first 30 days, so check your card agreement or call customer service to confirm.