What is a cash advance on a credit card?

A cash advance on a credit card is when a cardholder uses their card to withdraw cash against the card’s credit line. A cash advance can offer flexibility, but it generally comes with additional fees and higher interest rates than typical credit card purchases. 

Learn more about getting a cash advance on a credit card, how much it may cost and possible alternatives.

What you’ll learn:

• Credit card cash advances allow cardholders to borrow money against their credit lines.

• Cash advances may come with fees and have higher interest rates than typical credit card purchases. 

• You typically get a credit card cash advance at a bank or ATM. 

• Other types of credit card transactions may also be considered cash advances, including transferring money via apps like PayPal and Venmo, paying down debts like car loans and exchanging dollars for foreign currency.

A cash advance is a type of short-term loan that allows you to quickly access funds from a bank or other financial institution. Using a credit card is one way to get a cash advance. In this case, you borrow a certain amount of money against your card’s line of credit. 

Credit card cash advances typically involve fees and a higher annual percentage rate (APR) than standard purchases. Plus, credit cards typically don’t offer a grace period on cash advances. This means you’ll likely start accruing interest immediately.

With a cash advance on your credit card, you take out a loan against your credit line. This is different from a cash withdrawal from your bank, which uses the funds in your account.

Generally, credit card cash advances come with higher interest rates than regular credit card purchases. They typically also carry fees. So before getting a credit card cash advance, make sure you understand how much you’ll owe after interest and fees.

Depending on the credit card issuer, you may be able to get a cash advance by visiting your bank, withdrawing money at an ATM or writing a convenience check. Here’s a closer look at how these options work:

• Bank or credit union: Have a bank or credit union representative transact a cash advance using your credit card.

• ATM: Insert your card at an ATM, enter your PIN and follow the instructions on the screen. 

• Convenience check: When you get a new credit card in the mail, your issuer may send you blank convenience checks. You can fill out one of these checks and name yourself as the payee to get a cash advance. Then you can either cash it or deposit it at your bank or other financial institution. Be sure to read the terms and conditions related to using convenience checks before choosing this option.

Credit card issuers classify other transactions as cash advances too. They might include using a credit card to:

• Transfer money through wires or peer-to-peer (P2P) apps like PayPal and Venmo

• Pay monthly bills

• Make payments on other debt, such as auto loans

• Purchase traveler’s checks

• Purchase money orders

• Exchange foreign currency

• Buy lottery tickets

• Buy gaming chips or make other wagers

You can check with your credit card issuer to learn more about its specific policies.

The amount you can take as a credit card cash advance may depend on your card issuer’s cash advance limits. You can typically find your limit by reviewing your card’s terms or checking your credit card statement. If you’ve used all of your available credit on purchases, you may not be able to take out a cash advance even if you haven’t reached your cash advance limit.

You may be able to change your card’s cash advance limit or deactivate the cash advance option altogether. It depends on your issuer’s policies.

A cash advance fee is a transaction charge from your credit card issuer. It could be deducted from the cash advance when you receive it. Or it might be added to your balance.

Depending on the issuer, a cash advance fee may be a percentage of the cash advance amount or a flat fee. 

Additional fees may also apply. You can check your account terms for specifics.

If you use your card to get a cash advance at an ATM, there may be an ATM fee. And your bank or credit union may charge a fee if you go in person.

Cash advances can be an expensive way to access cash. Before going ahead, consider the following: 

• Check your account terms. That’s where you’ll typically find information about the cash advance APR and fees.

• Consider the amount. Minimizing the amount of cash you’re getting from your credit card can help you pay off your balance sooner. If you need a plan for paying down your balance, you might consider a debt repayment tactic like the debt snowball method or debt avalanche method.

• Consider how the cash advance might impact your credit. Cash advances can affect your credit utilization ratio, which is the amount of credit you’re using versus your total available credit. That means if the added balance of a cash advance goes unpaid for a while, it could hurt your credit scores.

• Talk to your lenders. If you’re thinking about using a cash advance to cover a loan payment, consider talking to your lender about other options. Depending on the circumstances, the lender may be willing to work with you to change your payment date, make a repayment plan or extend or defer your payment.

Here are some frequently asked questions about cash advances.

A credit card cash advance can be a convenient way to access cash if you don’t have it readily available—one of the many benefits a credit card can offer. But it’s typically more expensive than making other types of purchases with your credit card. 

That’s why it’s important to understand what qualifies as a cash advance, how cash advances work, how to use them responsibly and what potential costs you could end up paying.

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