Learn About Credit Card Cash Advances and Costs

Understanding What a Cash Advance Is

A credit card cash advance is when you borrow money directly from your credit card issuer, rather than making a purchase with the card. Instead of buying goods or services, you withdraw cash from an ATM, visit a bank branch, or request a check from your card issuer. The amount you can withdraw is typically limited to a percentage of your available credit—often between 20% and 50% of your credit limit, though this varies by card and issuer.

For example, if you have a credit card with a $5,000 credit limit and a cash advance limit of 30%, you could withdraw up to $1,500 in cash. This cash is deposited into your bank account or given to you in person, and you must repay it like any other debt on your credit card. The key difference between a cash advance and a regular purchase is how the transaction is processed and what fees and interest rates apply.

Credit card issuers distinguish cash advances from purchases because they view them as higher-risk transactions. When you buy something with a credit card, there is a physical product or service as collateral, and merchants have dispute resolution processes. With cash, there is no physical item and fewer protections for the issuer. This is why cash advances come with stricter terms and higher costs than regular purchases.

Cash advances can be obtained through several methods. ATM withdrawals are the most common—you use your credit card's PIN at any ATM that accepts your card network (like Visa or Mastercard). You can also visit a bank branch and ask for a cash advance from a teller. Some card issuers allow you to write a convenience check, which functions as a cash advance when deposited. A few card issuers even allow you to transfer cash through their mobile apps or websites.

Practical takeaway: Before considering a cash advance, understand that it is a loan from your credit card issuer that must be repaid with significant costs. It is different from a regular purchase and should only be used when you have no other borrowing options available.

The Costs and Fees Associated with Cash Advances

Cash advances carry multiple costs that make them one of the most expensive ways to borrow money. The primary costs include cash advance fees, interest rates, and potential ATM fees. Understanding each cost is essential before withdrawing cash on a credit card.

Cash advance fees are charged by the credit card issuer when you withdraw funds. These fees are typically either a flat dollar amount or a percentage of the amount withdrawn, whichever is greater. Common fee structures range from $5 to $10 for smaller withdrawals, or 3% to 5% of the cash advance amount. For example, if you take a $500 cash advance, a 5% fee would cost you $25. On a $1,000 advance, the same 5% fee would cost $50. Some cards charge a minimum fee of $3 even on very small advances, while premium cards may charge fees of $10 or more. These fees are added to your credit card balance immediately and must be repaid.

Interest rates on cash advances are significantly higher than rates on regular purchases. While a credit card's standard purchase APR (Annual Percentage Rate) might be 15% to 25%, cash advance APRs are often 25% to 30% or higher. Some cards charge APRs on cash advances that exceed 35%. The most important distinction is that cash advances do not receive the grace period that purchases typically do. Most credit cards offer a grace period of 20 to 25 days before interest accrues on purchases, meaning you can pay off a purchase without any interest charges if you pay in full by the due date. Cash advances have no grace period—interest begins accumulating immediately on the day you withdraw the funds.

Additional costs may apply depending on how you obtain the cash advance. If you use an ATM that is not owned by your credit card issuer's bank, you will likely pay an out-of-network ATM fee. This fee is charged by the ATM operator and is separate from the cash advance fee. Out-of-network ATM fees typically range from $2 to $4 per transaction. If you withdraw cash from a bank branch that is not affiliated with your card issuer, a foreign transaction fee may apply if the bank is outside your home country. Some card issuers also charge fees if you obtain a cash advance through a convenience check or balance transfer method.

The costs compound quickly on a cash advance. Using a realistic example: you take a $500 cash advance with a 5% fee ($25) and a 30% APR. After one month, interest of approximately $12.50 accrues on the $525 total balance (the original $500 plus the fee). If you only make minimum payments, it could take you 18 to 24 months to pay off the advance, and you would pay an additional $100 to $150 in interest alone. The total cost of borrowing that $500 could easily exceed $150 to $175.

Practical takeaway: Before taking a cash advance, calculate the total cost including the cash advance fee, ATM fees, and interest that will accrue. Compare this cost to other borrowing options like a personal loan, line of credit, or payday loan to understand whether a cash advance is truly your least expensive option.

How Cash Advances Appear on Your Credit Report and Score

Cash advances affect your credit in multiple ways, both immediately and over time. Understanding these impacts helps you make informed decisions about borrowing.

The first impact is on your credit utilization ratio, which is a major factor in credit scoring models. Your credit utilization ratio is the percentage of your total available credit that you are currently using. For example, if you have credit cards with a combined limit of $10,000 and you are currently using $3,000, your utilization ratio is 30%. Credit scoring models, particularly FICO and VantageScore, consider utilization ratios between 30% and 50% to indicate healthy credit use. When you take a cash advance, the amount is added to your credit card balance and counts toward your utilization ratio. If you take a $1,500 cash advance on a card with a $5,000 limit, your utilization on that card jumps to 30% immediately. High utilization ratios—typically above 50%—are viewed negatively and can lower your credit score by 10 to 50 points or more, depending on your overall credit profile.

A second impact is on your payment history and account status. This is the most important factor in credit scoring, accounting for about 35% of your FICO score. As long as you make your cash advance payments on time, they will not harm your payment history. However, missing a payment on a cash advance, even by a few days, will result in a late payment notation that can stay on your credit report for seven years. A 30-day late payment can lower your score by 50 to 100 points. A 60-day or 90-day late payment can have even more severe consequences, potentially lowering your score by 100 to 200 points. Additionally, if your cash advance balance grows because you are only making minimum payments and interest is accumulating, your utilization ratio remains high month after month, which continuously impacts your score.

Another consideration is the hard inquiry that may occur when you apply for a large cash advance. Some credit card issuers may perform a hard inquiry to check your creditworthiness before approving a sizable cash advance request. A hard inquiry can lower your credit score by a few points and remains on your credit report for two years, though it has the greatest impact on your score in the first few months. If your issuer conducts multiple hard inquiries within a short period, the impact may be more noticeable.

The length of time a cash advance balance remains on your account also matters. If you carry a cash advance balance for several months or years, it continuously affects your utilization ratio and may be noted in your credit file as a long-standing high balance. Paying off a cash advance as quickly as possible minimizes this negative impact.

Practical takeaway: Minimize the impact of a cash advance on your credit by paying it off as quickly as possible, avoiding additional cash advances, and keeping your overall credit utilization below 30%. If you must take a cash advance, consider it a short-term borrowing tool that should be repaid within one to three months.

Comparing Cash Advances to Other Borrowing Options

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