What is a cash advance on a credit card & how does it work?
Quick insights
- A cash advance allows you to borrow money against your credit card's line of credit, which is then added to your card balance.
- Cash advances are typically pricey, incurring immediate interest at a higher APR than purchases—along with fees, often around 5% of the advanced amount.
- Cash advances usually have no grace period, so interest begins accruing at the time of withdrawal.
Credit card cash advances let you tap into your credit line to get cash, but it's important to understand the costs of a cash advance and to know how credit card cash advances work before you take one out.
What is a cash advance?
When you take out a cash advance, you're borrowing money against your card's line of credit. The amount of the cash advance is then added to your credit card balance.
How does a cash advance work?
The amount of money you withdraw as a cash advance will appear on your credit card statement. Cash advances usually have no grade period, meaning interest begins accruing as soon as you withdraw money. Cash advances typically come with a higher APR than regular purchases and you may also incur a cash advance fee.
How to get a cash advance from a credit card
If you have a credit card that allows cash advances, you may be able to access cash in a few different ways.
Cash advances via an ATM
Getting a cash advance from an ATM usually requires your physical card, as well as a personal identification number (PIN).
You might also be subject to a cash withdrawal limit based on your available credit, the card issuer’s limits or the ATM owner’s limits. ATM surcharge fees may apply.
Cash advances via convenience check
Some lenders may provide convenience checks linked to your card account. Like a normal check, convenience checks allow you to submit payments to a particular person or organization, which are charged against your credit account.
In-person cash advances
You might be able to use your card to take out cash advances in person at a bank branch. Remember to take identification with you, if this is something you can do.
What is the maximum cash advance limit you can withdraw from a credit card?
Cash advances are typically capped at a percentage of your card's total credit limit. For example, if your credit limit is $15,000 and the card caps your cash advance limit at 30%, your maximum cash advance will be $4,500.
What are the costs associated with a cash advance?
Over and above the actual advance, which you will need to repay, cash advances usually come with the following:
- Fees. Cash advance fees can be substantial, where a typical fee is 5% of each cash advance you request. In addition, you are likely to pay ATM fees if you take out a cash advance via ATM.
- Cash advance APR. You will typically pay a higher interest rate on advances than what your card charges for purchases. And unlike purchases, which allow a grace period before interest begins to accrue, cash advance interest starts to accrue as soon as the advance is granted.
Credit card cash advances: Get the facts
Credit card cash advances can be a lifeline when you need cash, but be sure you understand the full cost of a cash advance before you take one out.
Closely read your card issuer's terms and conditions to learn how a credit card cash advance works, as well as what it will cost you.
