A cash advance is when you borrow money directly from your credit card issuer, not from a merchant

When you use your credit card to buy something, the card company pays the merchant and you pay the card company back later. A cash advance works differently: you withdraw actual cash from an ATM or bank using your credit card, and the card company lends you that money directly. You owe it back the same way you owe back purchases — but the cost is much higher.

The reason cash advances cost more is that card companies see them as riskier. You are borrowing unsecured money with no merchant involved, no receipt, and no way for the card company to repossess anything if you do not pay. Because of that risk, they charge you fees upfront and a higher interest rate than they charge on regular purchases.

Most people use cash advances when they need physical cash urgently and have no other way to get it. But because of the fees and interest, a cash advance should be a last resort, not a regular habit.

Key Takeaways

  • A cash advance charges you a fee (usually 3 to 5 percent of the amount) the moment you withdraw the money, plus a higher interest rate than purchases.
  • Interest on a cash advance starts accruing immediately — there is no grace period like there is for purchases.
  • You can get a cash advance at an ATM using your PIN, at a bank teller window, or sometimes through a convenience check your card issuer sends you.
  • Your credit card's cash advance limit is often lower than your overall credit limit, so you may not be able to withdraw as much as you can spend.

How the fees and interest work

When you take out a cash advance, you pay two costs right away: a cash advance fee and a higher interest rate.

The cash advance fee is a percentage of the amount you withdraw, usually between 3 and 5 percent. If you withdraw $500, you might pay $15 to $25 just to get the cash. Some card issuers set a flat minimum fee (like $5) if the percentage would be smaller. A few cards charge a flat fee instead of a percentage, but this is less common. Check your card's terms to see what your issuer charges.

The interest rate on a cash advance is almost always higher than the rate on purchases. While a purchase might carry an interest rate of 18 percent, a cash advance on the same card might be 25 percent or higher. This rate applies immediately — there is no grace period. If you do not pay off the cash advance in full by your next statement date, interest starts accruing right away.

Because of the fee plus the high interest rate, a $500 cash advance can easily cost you $50 or more if you carry the balance for a few months.

Where you can get a cash advance

You have several ways to access a cash advance, depending on what your card issuer offers.

An ATM withdrawal is the most common method. You insert your credit card into an ATM, enter your PIN, and withdraw cash just as you would with a debit card. Most ATMs accept credit cards, though some charge an additional ATM operator fee on top of your card issuer's cash advance fee. That extra fee can be $2 to $5 per transaction.

You can also visit a bank teller at your card issuer's bank or at many other banks and ask for a cash advance. The teller will process it the same way, and you will pay the same fees. Some people prefer this method because they can withdraw larger amounts and avoid ATM operator fees.

Some card issuers send convenience checks — checks linked to your credit card account that you can write to yourself or to someone else. When you cash or deposit the check, it counts as a cash advance. These checks often come with promotional rates (sometimes 0 percent for a set period), but read the fine print carefully because the promotional period may be shorter than you expect.

Cash advance limits and how they differ from credit limits

Your card issuer sets a separate cash advance limit that is usually lower than your overall credit limit. If your credit limit is $5,000, your cash advance limit might be $1,500 or $2,000. This limit exists because card companies want to reduce their risk on unsecured borrowing.

You can find your cash advance limit in your card's terms and conditions, in your online account, or by calling the card issuer's customer service number on the back of your card. Some issuers let you request an increase, though approval is not may provide.

It is important to understand that using a cash advance counts against your overall credit limit. If you withdraw $500 as a cash advance, you have $500 less available to spend on purchases. The cash advance limit is a separate cap, but the amount you withdraw reduces both your available credit and your cash advance limit.

Why cash advances hurt your credit score

A cash advance can damage your credit score in two ways: through your credit utilization and through the debt itself.

Credit utilization is the percentage of your available credit that you are using at any given time. If you have a $5,000 limit and a $1,500 cash advance limit, and you withdraw $500, you have used 10 percent of your overall limit. Credit scoring models penalize high utilization, so a cash advance that pushes your utilization up can lower your score. The effect is temporary — your score rebounds once you pay off the balance — but it happens immediately.

The second way a cash advance hurts your score is if you carry the balance and miss payments. Late payments stay on your credit report for seven years and are one of the most damaging things to your score. Because cash advances have high interest rates and fees, they are easy to carry longer than you intended, which increases the risk of falling behind.

When a cash advance might make sense

A cash advance is expensive, so you should only consider one if you have exhausted other options and truly need cash urgently.

A cash advance might make sense if you need cash for an emergency and have no other way to get it — for example, if you need to pay a mechanic in cash and your bank is closed. In that case, the fee and interest are the cost of solving an immediate problem, and it may be worth it.

A cash advance does not make sense if you are using it to pay another debt, to fund a purchase you cannot afford, or to get cash for everyday expenses. In those situations, you are borrowing at a very high cost to solve a problem that will likely get worse. If you find yourself regularly needing cash advances, that is a sign that your budget needs attention or that you need to talk to a credit counselor about your overall debt situation.

Some people use cash advances to take advantage of a 0 percent promotional rate on convenience checks. If the promotional period is long enough and you are certain you can pay off the balance before it ends, this can be cheaper than other forms of borrowing. But read the terms carefully — the promotional rate usually applies only to the convenience check amount, not to other purchases or cash advances on the same card.

How to pay off a cash advance

Once you have taken out a cash advance, your goal should be to pay it off as quickly as possible to minimize interest charges.

When you make a payment on your credit card, the card issuer applies it to your balance in a specific order set by law. Payments go first to the balance with the highest interest rate, which is usually your cash advance. This is good news — it means your payment is working hardest to reduce the most expensive debt.

To avoid interest altogether, you need to pay off the entire cash advance balance by your next statement due date. Because interest starts accruing immediately (unlike purchases, which have a grace period), even a few days of carrying the balance will cost you money.

If you cannot pay it off immediately, make the largest payment you can afford and then stop using the card for new purchases until the cash advance is gone. Every dollar you pay goes toward reducing the balance and the interest you owe.

Frequently Asked Questions

Can I use a cash advance to pay off another credit card?

Technically yes, but it is almost never a good idea. You would be paying a cash advance fee (3 to 5 percent) plus a higher interest rate to move debt from one card to another. A balance transfer — moving the balance to a card with a lower rate or a promotional 0 percent period — is almost always cheaper. Talk to your card issuer about balance transfer options before you consider a cash advance.

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

A balance transfer moves an existing debt from one card to another and usually has a lower fee (1 to 3 percent) and a promotional interest rate. A cash advance gives you cash and charges a higher fee (3 to 5 percent) and a higher interest rate. Balance transfers are for moving debt; cash advances are for getting cash. If you need cash, a cash advance is your only option. If you need to move debt, a balance transfer is almost always cheaper.

Does a cash advance show up differently on my credit report?

A cash advance does not appear as a separate line item on your credit report — it is part of your overall credit card balance. However, it does affect your credit utilization and your payment history. If you miss a payment on a cash advance, that late payment appears on your report just like any other late payment.

Can I get a cash advance if I have bad credit?

If you already have a credit card, you can usually get a cash advance up to your card's cash advance limit, regardless of your credit score. Your card issuer has already decided to lend to you. However, if you are trying to open a new card specifically to get a cash advance, approval will be harder with bad credit. Focus on rebuilding your credit first before opening new accounts.

What happens if I cannot pay back a cash advance?

If you do not pay, the balance will grow as interest accrues, and you will eventually fall behind on your payments. Late payments damage your credit score and can lead to collection calls. If the debt goes unpaid long enough, your card issuer may close your account or pursue legal action. If you are struggling to pay back a cash advance, contact your card issuer to discuss a payment plan or talk to a credit counselor about your options.