What is a Cash Advance?
A credit card cash advance is a short-term loan obtained when you use your credit card to get cash. You can get a cash advance from a bank or ATM if you have available credit on a card that offers a cash advance—but you'll pay high fees and interest, so you might consider finding a cheaper option unless you really need the money.
A credit card cash advance allows you to obtain a short-term cash loan using your credit card. You’ll take your credit card to a bank or ATM and can use it to obtain cash, rather than goods or services. While you can get cash quickly with a cash advance, it can be very expensive to borrow money this way even with a grace period.
Not only will you pay fees to access cash using your credit card, but you’ll also usually be charged a higher interest rate on the borrowed money, and of course it’s subject to your available credit limit. While there are downsides to a credit card cash advance, it’s usually a better option than something like a payday loan, which doesn’t rely on your credit score for approval but can be even more expensive than a cash advance.
On this page:
- How Do You Get a Cash Advance?
- Why Would You Want a Cash Advance?
- How Much Does a Cash Advance Cost?
- Alternatives to Cash Advances
- Avoiding Future Cash Advances
on Citizens Bank’s secure website
Citizens Bank Cash Back Plus® World Mastercard®
- Unlimited 1.8% cash back on every eligible purchase
- 0% introductory APR on balance transfers for 15 billing cycles
- No annual fee or foreign transaction fees
How Do You Get a Cash Advance?
Most major credit cards allow cash advances, so if you have available credit, you can use a cash advance to obtain money up to your cash advance limit. There are three possible ways to obtain a cash advance:
- Use an ATM: You’ll put your credit card into an ATM, just as you would with an ATM or debit card, and can withdraw needed funds. You’ll need a PIN, which you may need to call your credit card company to obtain.
- Visit a bank or credit union: Many banks or credit unions allow you to use your credit card to access funds. This is an option if the bank participates in your credit card’s payment network, such as Mastercard or Visa.
- Use checks from your credit card company: With some credit cards, you can contact the card issuer and ask them to mail you convenience checks you can use to access cash.
Remember, you can’t withdraw more funds than your cash advance limit—and typically the amount of money you can obtain through a cash advance is smaller than your available credit line. Your credit card company may limit you to just a few hundred dollars in advanced funds.
Why Would You Want a Cash Advance?
Obtaining a cash advance using a credit card definitely costs more than just charging goods or services, but sometimes a cash advance seems like the only solution. For example, you may need a cash advance if:
- You have to pay for rent and your landlord doesn’t accept credit card payments
- You’ll be traveling somewhere remote and need cash because credit cards aren’t accepted or you won’t be able to make credit card purchases for any reason
- You have other expenses that must be paid for in cash and don’t have sufficient funds to cover them in your checking account or elsewhere or you have small business expenses that need to be paid quickly for cash flow purposes
If you need to pay for something that cannot be paid for with a credit card, such as a mortgage or rent payment, you may wish to look into third-party processors such as Plastiq rather than having a cash advance balance added to your credit card bill. This service allows you to charge goods or services even where credit cards aren’t accepted, and the 2.5% fee may be much less costly than paying for a cash advance, plus you won’t be adding to your credit card debt.
How Much Does a Cash Advance Cost?
A credit card cash advance is very expensive and the cash advance APR may make this option not worth it. When you obtain a cash advance, you’ll likely need to pay:
- A fee to your card issuer: While fees vary by card issuer, many card issuers charge the greater of $10 or between 3% and 5% of the amount of the cash advance.
- Additional ATM fees or fees to the bank or credit union that facilitates the loan. Fees vary by financial institution.
- High interest until the loan is repaid: Interest charged on a cash advance can be much higher than the standard credit card interest charged on purchases. It’s common for annual percentage rates to be above 25%.
Specific costs vary based on provider and current card offers. For example, here are some of the cash advance fees charged by major credit issuers.
Discover: Cash Advance Fees
When you obtain a cash advance through Discover, here’s what you need to know and what you can expect in terms of costs:
- Cash advance fees equal to the greater of $10 or 5% of the amount of each cash advance
- Interest charges equal to the Prime Rate plus 21.74%. As of October 2018, the interest rate is 25.24%
>> Read More: Best Discover Credit Cards
Capital One: Cash Advance Fees
Here are the estimated costs for a cash advance from the Capital One financial institution:
- Cash advance fees equal to the greater of $10 or 3% of the amount of each cash advance
- Interest charges equal to the Prime Rate plus 21.65%. As of October 2018, the interest rate is 24.9%
>> Read More: Best Capital One Credit Cards
Bank of America Cash Advance Fees
Costs for a cash advance at Bank of America include the following using an applicable credit card account include:
- A cash advance fee equal to the greater of $10 or 3% of the amount of each cash advance
- Interest charges of 26.99% as of October 2018
>> Read More: Best Bank of America Credit Cards
Wells Fargo Cash Advance Fees
Here are the estimated costs of a cash advance and getting cash back with a Wells Fargo credit card:
- A cash advance fee equal to the greater of $10 or 5% of each advance
- Interest costs of 25.99% to 27.99% based on creditworthiness, as of October 2018
>> Read More: Wells Fargo Credit Cards
Alternatives to Cash Advances
Because of the high costs of cash advances and the possible downsides in the long run, it’s best to explore all your borrowing options before you determine if it makes sense to borrow money from your credit card issuer. Some of your other options include the following:
Personal loans can be obtained from a bank, credit union, or online lender. You’ll need to qualify for a personal loan, and the process of obtaining borrowed funds can be more cumbersome and time-consuming than taking a cash advance. However, the costs of obtaining a personal loan are typically much lower. At the same time, applying for a personal loan can lower your credit.
You may also be able to borrow more money using a personal loan than a cash advance and can pay back what you borrow over time. Compare the interest rates and repayment periods among different lenders to find the most affordable loan with payments that fit within your budget.
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Borrowing Money from Friends or Family
If you have loved ones who may be willing to lend to you, this would allow you to avoid the high fees that come with obtaining a cash advance.
Before you borrow, talk with your family member or friend about expectations for loan repayment so you don’t damage your relationship. You may even want to create a written contract specifying when and how you’ll repay the loan and whether you’ll pay interest.
Overdrawing Your Bank Account
Another way to gain access to a little extra cash is to overdraw your bank account or take more money out of your account than you have available.
Not every bank account allows you to overdraw, or take out more money than is in the account. In fact, a rule put into place in 2010 requires banks to decline transactions due to insufficient funds. However, you have the option to opt into overdraft coverage. If you overdraw your bank account, you won’t increase your credit card bill but you’re still going to be paying finance charges.
If you’re eligible to overdraft, when you write a check you don’t have the funds for or withdraw more cash than you have, the bank will give you the money or cash the check even though you can’t cover the costs. You’ll be charged an overdraft fee, which is usually around $35 and will typically pay additional fees, such as $25 per week for each week your account remains overdrawn.
When you’re eligible to overdraft, you may be able to use overdraft protection to shield you from some of these costs. Overdraft protection means you link a savings account, credit card, or line of credit to your bank account. Be aware, though, that if you’re signed up for overdraft protection using your credit card, your card issuer may treat any charges incurred as a cash advance anyway. In this case, you’ll still end up paying the high costs associated with cash advances.
Avoiding Future Cash Advances
If you find you need to use cash advances to help you with financial shortfalls, you may want to make some changes in order to avoid continued reliance on his expensive form of credit and a constantly high credit card balance and credit card bill. This could include setting a budget so you can live within your means and saving three to six months of living expenses in an emergency fund so you can respond to a financial emergency without needing a cash advance.
While a cash advance can get you over a tight spot, you’ll pay a lot for the privilege of accessing money through a credit card. It’s best to avoid this practice whenever possible and being smart about how you manage your money can help you make that happen.
Author: Christy Rakoczy
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