A cash advance is a short-term loan you can get by borrowing cash against your credit card's credit limit. It can be obtained through ATMs, banks, convenience checks, or even online transfers. However, cash advances usually come with higher interest rates than regular credit card purchases, begin accruing interest immediately without a grace period, and often include upfront fees typically ranging from 3% to 6% of the amount withdrawn or a flat fee, whichever is greater. The amount borrowed is added to the credit card balance and must be repaid along with any fees and interest.
How Cash Advances Work
- You can get cash advances at ATMs by using your credit card and PIN.
- Some banks allow cash advances in person at the teller window.
- Convenience checks sent by the credit card issuer can also be used as cash advances.
- Interest on cash advances starts immediately with no grace period.
- Cash advance credit limits may be lower than the overall credit card limit.
- There are often additional fees and higher APRs for cash advances than for regular purchases.
Costs and Considerations
- Cash advance fees are charged upfront, usually either a flat fee or a percentage of the cash amount.
- Interest rates on cash advances are significantly higher and accrue from the date of the transaction.
- Payments may be applied first to lower-interest balances, potentially prolonging the cash advance debt.
- Cash advances do not earn credit card rewards or count toward sign-up bonuses.
- Use cash advances only in emergencies because they can be costly.
This makes cash advances a convenient but expensive borrowing option that should be used cautiously.