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A cash advance on a credit card is a short-term loan that lets you gain quick access to cash. Essentially, it allows a credit card to be used as a debit card. But unlike a debit card, which gives you access to money that is already yours, the money from a cash advance must be paid back.
You might consider a cash advance if you need cash right away—like if you’re at a business that only accepts cash—but don’t have any easily accessible in a checking account. Typically, they don’t require you to go through an application process as you would for a personal loan. You don’t need to put up any collateral. You just need to have a credit card and identification information.
Although convenient, cash advances aren’t without some major caveats. Here we discuss how they work, how much they can end up costing you and the upsides of more affordable alternatives.
How Does a Cash Advance Work?
It’s important to understand how cash advances work and how they affect your credit score before deciding how you’ll access cash.
How to Get a Credit Card Cash Advance
There are multiple ways to get a cash advance. Ultimately, the method you choose will be based on how much time you have and if you have access to a nearby bank or ATM. The following options are offered by many credit card issuers:
- Use your PIN at an ATM
- Visit a bank or credit union
- Access cash via online direct deposit
- Request a cash access check delivered via mail
Can You Get a Cash Advance on a Debit Card?
You may use your debit card to get a cash advance, although this process is different. Similar to withdrawing cash at an ATM, a debit card cash advance takes money that you already have in your checking account. You may not request more cash than you have in your account.
So what’s the difference between a debit card cash advance and simply withdrawing money from an ATM? Mainly, a cash advance has higher limits. ATMs typically limit daily cash withdrawals to $300–$500. With a debit card cash advance, limits are in the thousands, rather than the hundreds. You may also go to any bank—not just the one associated with your debit card issuer.
Credit card cash advances are more common because the point is to gain access to cash quickly when you don’t have any on hand.
You may withdraw cash up to the amount of your credit card cash advance limit. This is typically lower than your total credit limit. To find your cash advance limit, you may:
- Call the automated customer service number on the back of your credit card
- Log on to your credit card account online
- Check your credit card statement
It’s important to know your limit before withdrawing cash. If you exceed your cash advance limit, you could be charged with fees and likely a higher interest rate.
How Much Does a Cash Advance Cost?
A cash advance is one of the most expensive ways to access cash because of hefty fees and interest.
- Cash advance fees: Fees will range from three to five percent of the total amount withdrawn, or $5 to $10, whichever is greater. To learn more about your credit card issuer’s fees, check your online credit card account.
- ATM or bank fees: Most ATMs or banks will charge a fee for their services.
- High interest rates: The average interest rate on a credit card cash advance is 23.68 percent, which is nearly eight percentage points higher than the average credit card APR.
Additionally, cash advances lack a grace period. This means that interest starts accruing immediately after you withdraw the cash. To reduce the amount of interest charged, pay off the entire balance as soon as possible.
Because of the high cost of a cash advance, you may end up paying just as much—or more—than the amount of your advance. This all depends on your interest rate, how quickly you pay off the balance and how much you withdrew.
Less Expensive Alternatives
Depending on your situation, you may want to consider more affordable ways to access cash in an emergency situation.
Consider a Personal Loan
If you have good credit, the interest rate on a personal loan will likely be lower than that of a cash advance. You may not gain access to the cash as quickly, but you may save more money over the life of the loan.
Borrow From Friends and Family
Although it may be an uncomfortable ask, friends and family can be a great resource in an emergency—and statistically, the odds may be in your favor. According to a survey we ran in 2018, over half of Americans (56 percent) said they would lend money to either a family member, friend or coworker.
Build an Emergency Fund
Although this is a longer-term solution, having an easily accessible emergency savings fund ensures that you’ll always have cash on hand when you need it the most. This could avoid the need for a cash advance.
Use Home Equity
If you’re a long-time homeowner, you may qualify for a home equity loan or line of credit. This strategy allows you to borrow against the value of your home and pay it back over time with a variable rate (i.e., home equity line of credit) or fixed interest rate based on your credit score (i.e., home equity loan). Talk to a financial planner about which choice is right for your situation and credit score.
Adjust Your 401(k) Contribution
Saving for retirement is a wise choice, but you might consider temporarily changing your 401(k) contributions if you need liquid funds. Talk to your employer’s HR department about how to make changes to your direct deposit accounts.
Disabling Cash Advances
Because of their convenience, it may be tempting to take out a cash advance even if you know it will end up costing you a lot of money. If you’d like to prevent yourself or an authorized user from taking out a cash advance, your credit card issuer may allow you to disable the feature.
Depending on your creditor’s policies, you may be able to disable or block cash advances by doing the following:
- Opt out of cash advances entirely
- Have no PIN so that ATM cash advances are not possible
- Reduce your cash advance limit to $0
- Enable the card lock feature to temporarily prevent card use entirely
Every credit card issuer’s policies are different, so contact yours today to learn more.
How Cash Advances Affect Your Credit Score
The act of taking out a cash advance doesn’t directly impact your credit score. However, it may indirectly affect your score in two different ways.
First, it will raise your credit utilization rate. Best practices suggest staying at or below 30 percent credit utilization. If your cash advance causes your utilization rate to rise above that threshold, you may see a dip in your credit score.
Second, the high fees and interest rates may affect your ability to make consistent on-time payments. A missed or late payment may have devastating effects on your credit score, so always make sure you have a repayment plan whenever you take out an advance.
The bottom line: Cash advances are convenient but carry a high price tag. When you need cash,consider other more affordable options to ensure you always have it when you need it most.
Reviewed by Kenton Arbon, an Associate Attorney at Lexington Law Firm. Written by Lexington Law.
Kenton Arbon is an Associate Attorney in the Arizona office. Mr. Arbon was born in Bakersfield, California, and grew up in the Northwest. He earned his B.A. in Business Administration, Human Resources Management, while working as an Oregon State Trooper. His interest in the law lead him to relocate to Arizona, attend law school, and graduate from Arizona State College of Law in 2017. Since graduating from law school, Mr. Arbon has worked in multiple compliance domains including anti-money laundering, Medicare Part D, contracts, and debt negotiation. Mr. Arbon is licensed to practice law in Arizona. He is located in the Phoenix office.
Note: Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.