A cash advance on a credit card is when you withdraw cash by borrowing against your credit card's available credit limit. This can be done at an ATM, bank branch, or by using convenience checks provided by the credit card issuer. Essentially, you are taking a short-term loan from your credit card rather than using your own funds, as with a debit card withdrawal
. Key features of credit card cash advances include:
- Higher fees and interest rates: Cash advances typically come with a transaction fee (either a flat fee or a percentage of the amount withdrawn) and a higher annual percentage rate (APR) than regular credit card purchases. Interest on cash advances usually starts accruing immediately, with no grace period
- Separate balance and payments: The cash advance amount is added to your credit card balance but tracked separately from purchases. Minimum payments may be applied first to lower-interest balances, meaning the cash advance balance can accumulate interest longer if only minimum payments are made
- Limits and restrictions: There may be limits on how much cash you can withdraw as a cash advance, often lower than your total credit limit
- Other transactions considered cash advances: Besides ATM withdrawals, some transactions such as money transfers via apps (e.g., PayPal, Venmo), purchasing traveler’s checks, foreign currency, money orders, lottery tickets, or gambling chips may also be classified as cash advances and incur similar fees and interest
In summary, a credit card cash advance is a quick way to access cash by borrowing against your credit line, but it is generally costly due to fees and high interest rates, so it is best used only for emergencies
