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, you are withdrawing cash using your credit card at an ATM, bank teller, or through a cash-like transfer. The money comes from your credit card company, not from your own account. Unlike a purchase, which you charge to your card and pay back later, a cash advance starts charging interest immediately — there is no grace period where you can pay it off interest-free.
The cost difference matters. A typical credit card purchase might have a 20% annual interest rate, but a cash advance on the same card often carries 25% or higher. You also pay an upfront fee, usually 3% to 5% of the amount you withdraw. On a $500 cash advance at 4% fee plus 25% annual interest, you are paying $20 just to get the money, plus interest that starts accruing the same day.
Key Takeaways
- Cash advances charge interest from day one with no grace period, unlike purchases which may have 20 to 30 days before interest starts.
- The interest rate on a cash advance is usually 5 to 10 percentage points higher than your card's purchase rate, and you pay an upfront fee of 3% to 5% of the amount withdrawn.
- Your credit card company reports the cash advance to credit bureaus as a separate type of debt, which can lower your credit score because it looks like higher-risk borrowing.
- Cash advances count toward your total credit limit, so withdrawing $500 leaves you only $500 of your $1,000 limit for purchases.
Where you can get a cash advance and what it costs
You can withdraw a cash advance at any ATM that displays your card's logo (Visa, Mastercard, American Express, Discover). You can also go to a bank teller and ask for a cash advance, or use a convenience check your card issuer mails you. Some cards let you transfer money to your bank account, which functions as a cash advance even though no physical cash changes hands.
The fee structure is straightforward but adds up fast. Most cards charge a flat fee ($5 to $10) or a percentage of the amount (3% to 5%), whichever is larger. So a $100 advance might cost $5 flat, but a $500 advance costs $20 (4% of $500). Interest starts accruing immediately at your cash advance rate, which your card issuer sets separately from your purchase rate. Check your card's terms or call the issuer to find your specific cash advance rate and fee.
How a cash advance affects your credit score
A cash advance lowers your credit score in two ways. First, it increases your credit utilization — the percentage of your total credit limit you are using. If you have a $2,000 limit and take a $500 cash advance, your utilization jumps to 25%, which credit scoring models treat as riskier. Second, credit bureaus see a cash advance as a separate type of debt from purchases, and cash advances are weighted more heavily in risk calculations because they suggest financial strain.
The damage is usually temporary. Once you pay off the cash advance, your utilization drops and the score recovers. But the hit happens immediately when you withdraw the money, even before you have borrowed anything. This is different from a purchase, where the credit impact depends on your balance at the time your statement closes.
When a cash advance makes sense and when it does not
A cash advance is rarely the cheapest way to borrow money. A personal loan from a bank or credit union usually charges 10% to 15% interest with no upfront fee, making it far cheaper than a 25%+ cash advance. A payday loan, despite its bad reputation, is sometimes comparable in cost for very short-term borrowing. Even a balance transfer to a 0% promotional card (if you may have access to) costs less than a cash advance.
Cash advances make sense only when you need cash immediately and have no other option — a medical emergency where a doctor's office will not take your card, or a situation where you need physical currency and cannot wait for a transfer. Even then, pay it off as fast as possible. Every day the balance sits, you are paying interest at a rate higher than almost any other form of credit.
How to pay back a cash advance
Your cash advance appears on your credit card statement as a separate line item from purchases. When you make a payment to your card, the payment goes toward your lowest-interest debt first — usually purchases — and your highest-interest debt last — usually the cash advance. This means if you have both a purchase balance and a cash advance balance, your payment will chip away at the purchase first, leaving the cash advance to accrue interest longer.
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 force payment toward the cash advance is to pay off the entire card balance, including all purchases.
Alternatives to a cash advance
If you need cash, explore these options before using a cash advance. A personal loan from a bank, credit union, or online lender usually charges 10% to 20% interest with no upfront fee — cheaper than a cash advance. A balance transfer card offers 0% interest for 6 to 21 months if you may have access to, though you pay a 3% to 5% transfer fee upfront. A line of credit from your bank (if you have an existing relationship) may offer better terms than a cash advance.
If you need a small amount of cash for a specific purchase, ask the merchant if they accept payment plans or if you can use a debit card instead. Some retailers offer their own financing at 0% for a set period. A cash-back purchase — buying a small item and asking for cash back — avoids the cash advance fee and interest rate, though it only works at stores that offer it.
What happens if you cannot pay back a cash advance
If you do not pay a cash advance, it behaves like any other credit card debt. The balance accrues interest, your minimum payment increases, and missed payments damage your credit score. After 30 days late, the issuer reports it to credit bureaus. After 180 days (six months) of non-payment, the card issuer may charge off the debt, meaning they write it off as a loss and sell it to a debt collector.
A debt collector can then sue you for the balance, and if they win, they can garnish your wages or place a lien on your property (rules vary by state). The charge-off stays on your credit report for seven years from the date of first delinquency, making it hard to borrow money at reasonable rates during that time. If you are struggling to pay, contact your card issuer before you miss a payment — some offer hardship programs that lower your interest rate or pause interest temporarily.
Frequently Asked Questions
Can I use a cash advance to pay off another credit card?
Technically yes, but it is expensive. You pay the cash advance fee and interest rate on the money you withdraw, then use it to pay another card. You are essentially converting one debt into a more expensive debt. A balance transfer (moving the balance directly from one card to another) is cheaper because you avoid the cash advance fee and may get a promotional 0% rate.
Does a cash advance show up differently on my credit report than a purchase?
Yes. Credit bureaus track cash advances separately from purchases, and credit scoring models treat them as higher-risk borrowing. This means a $500 cash advance hurts your score more than a $500 purchase, even on the same card. The damage is temporary — it fades as you pay the balance down — but it happens immediately when you withdraw the money.
What if my card does not have a cash advance limit?
Some cards set a separate, lower limit for cash advances than for purchases. You might have a $5,000 purchase limit but only a $1,000 cash advance limit. If your card has no cash advance limit listed, call your issuer to ask. They can tell you the maximum you can withdraw and may be able to increase it if you request it.
Is there a way to avoid the cash advance fee?
No. Every credit card charges a cash advance fee, and it is non-negotiable. The fee is set by your card issuer and appears in your card's terms. The only way to avoid it is to not take a cash advance. If you need cash, a personal loan or balance transfer is usually cheaper.
Can I take a cash advance from a credit card I just opened?
Usually yes, but some issuers restrict cash advances on new accounts for the first 30 to 90 days. Check your card's terms or call the issuer to confirm. Even if you can take a cash advance immediately, the high cost makes it worth waiting if possible.