Key takeaways
- A cash advance lets you borrow cash against your credit card’s limit.
- Most cards charge a cash advance fee, often a percentage of the amount with a minimum.
- Cash advances usually have a higher APR, and interest starts right away with no grace period.
- Some transactions, like buying gambling chips or money orders, may count as cash advances.
- Try cheaper options first, like asking for a payment plan or a credit union loan.
When you need cash fast, your credit card can feel like the easiest answer: put it in an ATM and take out money. But a cash advance is one of the most expensive ways to borrow, because it stacks a fee, a higher interest rate and no grace period. Here’s how the costs add up.
How a cash advance works
A cash advance lets you withdraw cash using your credit card, at an ATM with a PIN, at a bank counter, or by using a “convenience check” your card company mails you. The amount is added to your card balance. Most cards set a separate, lower cash advance limit than your overall credit limit.
Why it costs so much
1. A fee up front
According to the CFPB, card companies may charge a flat fee or a percentage of the amount, and cash advance fees often have a minimum, which makes small advances especially costly. The ATM owner may charge its own fee on top.
2. A higher interest rate
Cash advances usually carry a higher APR than purchases. Your card agreement and statement list it.
3. No grace period
With purchases, you usually pay no interest if you pay your full balance by the due date. Cash advances are different. The CFPB explains that interest on cash advances generally starts from the date of the transaction.
A quick example
These numbers are only for illustration. You take a $500 cash advance with a 5% fee ($10 minimum) and a 29% APR, and pay it off after one month:
| Amount | |
|---|---|
| Cash advance fee (5% of $500) | $25 |
| Interest for about 30 days at 29% APR | about $12 |
| ATM owner’s fee | $3 |
| Cost of borrowing $500 for one month | about $40 |
That’s about 8% of the amount, for a single month.
Transactions that may count as cash advances
Depending on your card agreement, these may be treated as cash advances, with the same fees and immediate interest:
- ATM withdrawals and bank counter cash.
- Convenience checks from your card company.
- Buying money orders, traveler’s checks or prepaid cards.
- Some person-to-person payment app transfers funded by a credit card.
- Gambling transactions, like buying casino chips or funding betting accounts. The CFPB has reported that cash advance fees rose in states after sports betting became legal.
Check your card agreement, or call your card company, if you’re not sure.
If you already took a cash advance
- Pay it off as soon as you can. Interest is adding up daily.
- Pay more than the minimum. Under federal rules, payments above the minimum generally go to the balance with the highest rate first, which is often the cash advance.
- Avoid taking another one to cover the first.
Cheaper options to try first
- Ask the company you owe for more time or a payment plan. Many will work with you if you call before the due date.
- A credit union loan. Many credit unions offer small, lower-cost loans to members.
- An employer pay advance on wages you’ve already earned.
- Local help. Call or text 211, or visit 211.org, for help with rent, utilities and food.
- Avoid payday loans. They usually cost even more. See payday loans: costs, risks and safer alternatives.
The bottom line
A cash advance gives you money fast, but you pay a fee, a higher rate and interest from day one. Use it only as a last resort, pay it back quickly, and try cheaper options first. Building a small cushion can help next time; see how to build an emergency fund while you’re in debt.
Sources: CFPB: can I withdraw money from my credit card at an ATM · CFPB: what is a grace period for a credit card · CFPB: cash advance fees and sports gambling