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In this article:
- What Is a Cash Advance?
- Why Am I Being Charged a Cash Advance Fee?
- Cash Advance Terms and Fees
- How Much Is a Cash Advance Fee?
- Should You Get a Cash Advance?
- How to Avoid Cash Advance Fees
Credit card companies charge a cash advance fee when you use your card's line of credit to get access to cash. Because card issuers tack on fees and high interest rates to these transactions, cash advances are an expensive way to get extra cash.
Here's what you need to know about cash advances, including when your card issuer may charge a cash advance fee, how much you can expect to pay and how to avoid them.
What Is a Cash Advance?
You already know you can use your credit card to make purchases, but you can also tap into your card's line of credit to get cash when you need it. This is called a cash advance. Depending on your credit card issuer, you may be able to get a cash advance in person at a bank or credit union, at an ATM, over the phone or by cashing convenience checks your card issuer provides.
The limit for cash advances is typically lower than the card's total credit limit. So, if your card has a $5,000 credit line, you may only be able to take out a cash advance of up to $1,000.
When you get an advance, the amount you borrow, plus fees, is added to your credit card balance, and you must repay it with interest just like you would a purchase.
Learn more >> What Is a Cash Advance and How Does It Work?
Why Am I Being Charged a Cash Advance Fee?
You should expect to pay a fee if you request a cash advance, but that's not the only reason you may see a cash advance fee on your next credit card statement. Your credit card company may classify multiple types of transactions as cash advances, even if you don't receive the cash directly. You may be charged a fee if you use your credit card to:
- Transfer money through peer-to-peer apps, such as Venmo
- Make a loan payment
- Complete a wire transfer
- Purchase traveler's checks
- Buy money orders
- Pay for lottery tickets or gambling
- Exchange foreign currency
Cash Advance Terms and Fees
While cash advances offer a fast and easy way to get money, it's important to understand the costs associated with them, including:
- Cash advance APR: The interest rate your credit card provider charges on cash advances is typically higher than the rate for purchases.
- Cash advance fee: Credit card companies charge a fee for transfers they classify as cash advances.
- Bank fee: Your bank or credit union may charge a fee if you use your credit card to get a cash advance in person.
- ATM fee: If you use your card to get a cash advance at an out-of-network ATM, your card issuer may charge a fee.
How Much Is a Cash Advance Fee?
Credit card companies typically charge 3% to 5% of the cash advance amount or $10, whichever is higher. Fees vary, however, and your card issuer may charge more or less.
You'll also pay interest on the advance amount, and companies typically charge a higher rate on cash advances than purchases. What's more, cash advances may not qualify for the same grace period as purchases, so interest can start accruing immediately.
To give you an idea of how much a cash advance may cost, take a look at the table below. In this example, the credit card company charges a 5% fee with a $10 minimum, a cash advance APR of 29.99%, and you pay off the advance amount in six months.
| Cash Advance Amount | Fee | Monthly Payment | Interest | Total Cost |
|---|---|---|---|---|
| $100 | $10 | $19.97 | $9.82 | $119.82 |
| $500 | $25 | $95.31 | $46.87 | $571.86 |
| $1,000 | $50 | $190.62 | $93.73 | $1,143.72 |
| $2,000 | $100 | $381.24 | $187.47 | $2,287.44 |
Keep in mind that if you pay more than the minimum due each month, the card issuer will first apply the extra funds to the balance with the highest interest rate, which will likely be your cash advance. But there is an exception to this rule. If you have a deferred interest offer with a 0% introductory APR, you can ask the credit card company to apply the extra funds to the deferred interest balance first.
Should You Get a Cash Advance?
Because it's fast and easy, getting a cash advance when you're in a pinch can be tempting. It may make sense if you only need a small amount and can repay what you borrow (including fees) quickly to avoid high interest charges. However, a cash advance may not be your best bet if you need a larger sum of money or an extended repayment timeline. Before taking a cash advance, look into other ways to cover your short-term cash needs.
How to Avoid Cash Advance Fees
Taking out a cash advance isn't the only way to get money fast. Here are other options to consider.
- Savings: If you have an emergency fund, this may be a good time to use it. You'll avoid the fees and interest associated with a cash advance. Be sure to replenish it after tapping into it.
- Paycheck advance app: This may sound like a cash advance from a credit card, but it's not. Paycheck advance apps issue short-term interest-free loans with no fees and no credit check, but you may need to pay extra to get your money right away.
- Buy now, pay later (BNPL) app: These services let you make a purchase now and pay for it over time—usually in four equal installments—with no interest. Depending on the app, you may be able to make purchases online or in person, and in many cases, there's no hard credit check.
- Friends and family: If you have a loved one who's willing to lend you the money, you may be able to get a no- or low-interest loan. Draw up a contract to make it official, and repay what you borrow on time to avoid damaging your relationship.
- Personal loan: If you have good credit, you may be able to get a personal loan with a lower interest rate than a credit card cash advance. Some lenders even fund your loan the day your application is approved.
Learn more >> Alternatives to Credit Card Cash Advances
Is a Cash Advance Worth It?
A cash advance may seem like the answer to your problems when you're short on cash and need money fast. But with fees and high interest rates that kick in right away, the risks may not outweigh the benefits if you can't pay it off quickly. Because there are other ways to get the cash you need, and many don't require a credit check, you may want to explore alternatives before getting a cash advance.
If you discover that a financing option requiring a hard credit check best meets your needs, you can check your credit score from Experian for free at any time to see how it may affect the rate you receive. If your credit is affecting your ability to qualify for a low rate, take steps now to improve your credit. It may not help out this time, but you'll be prepared if you need to secure financing in the future.
