What's a Credit Card Cash Advance?
Your credit card may come with the ability to make a transaction called a cash advance. You might consider using it when you want to get cash from your credit card, but know that it's one of the most expensive credit card transactions.
What is a Cash Advance?
A cash advance on your credit card is an amount of cash borrowed against your credit limit. It's like withdrawing money from the ATM with your debit card, except the cash comes from your credit limit, which means you have to pay it back with interest.
You can take out a cash advance on your credit card by using your PIN at an ATM or by using a convenience check your credit card issuer has sent you.
Don't confuse a credit card cash advance with a payday cash advance loan that you can get from a payday loan store. The payday cash advance doesn't require a credit check and must be repaid directly to the payday loan store by your next payday.
Your credit card cash advance is tied to your credit card (which required a credit check to be approved) and comes with the option to pay over a period of time as long as you make minimum payments.
How Much Cash Can You Withdraw?
You can withdraw cash up to your cash advance limit, which may be lower than the credit limit you're given for purchases. Check a recent copy of your credit card statement or login to your online account to check your cash advance limit and the amount of credit you have available for a cash advance.
Your available cash advance limit may be lower than your total limit if you already have a balance on the credit card.
Cost of a Cash Advance
Cash advances come with a cash advance fee and typically have higher interest rates than the interest rate for purchases. The cash advance fee can be charged as a percentage of the cash advance or a flat rate.
For example, your credit card issuer may charge a fee of 5% of the advance or $10, whichever is greater. Check your credit card terms to confirm the exact fee you'll pay for cash advances.
Cash advances don't have a grace period, meaning interest begins accruing on the balance as soon as the transaction is completed. This is true even when you pay your balance in full and start the billing cycle with a zero balance. You'll always pay a finance charge on a cash advance even if you pay it in full when your billing statement comes. To reduce the amount of interest you pay on a cash advance, pay it off as soon as possible, even if that means paying before your billing statement comes.
In addition to the cash advance fee, you'll also be charged an ATM fee when you use an ATM for a credit card cash advance.
Paying Off a Cash Advance Balance
Cash advance balances are separate from your purchases balance. Your monthly payments are split up among the balances since they have different interest rates. If you only make the minimum payment, it will likely be applied to the balance with the lowest interest rate - that's up to your credit card issuer.
Only the payment amount above the minimum will be applied to the balance with the highest interest rate, which is likely your cash advance balance.
So, if you're carrying multiple balances, you'll have to pay more than the minimum if you want to reduce the cash advance balance quickly.
When a Cash Advance Isn't Cash
Some transactions are treated like a cash advance even though you never physically withdrew cash on your credit card. For example, if your credit card is setup for overdraft protection, the overdraft amount will be treated as a cash advance. Wire transfers, money orders, and cryptocurrency purchased with your credit card may also be considered cash advances. Refer to your credit card agreement to figure out which transactions may be treated as cash advances.