What Is a Cash Advance on a Credit Card?

Learn what a cash advance is and how it works

Sometimes you may find yourself in a situation—maybe even an emergency—where you need cash. If there’s no other way to get it, you might consider withdrawing money using your credit card. This is known as a cash advance.

A cash advance isn’t like using your debit card to get cash. The money doesn’t come from your bank account. Instead, it’s added to your credit card balance. So while it’s convenient, it can be more expensive than making a purchase on your credit card. Read on to learn more about how a cash advance works, how much it may cost, and whether there’s an alternative that could be better for you.

How Does a Cash Advance Work?

A cash advance lets you borrow a certain amount of money against your card’s line of credit. 

You can find out your cash advance limit by checking your card statement or by contacting your card issuer. It could be less than your card’s credit limit for purchases.

There are a few ways you can get money through a cash advance:

  • At your bank: You can ask your teller for a cash advance with your credit card.
  • At an ATM: You can insert your card, enter your PIN and receive your cash. 
  • With a check: If you’ve been given checks by your credit card issuer, you can fill one out to yourself. Then you can either cash it or deposit it at your bank. But make sure you read the terms and conditions related to the check before using that option.

Simple, right? But simplicity could come at a price. However you choose to receive a cash advance, it’s likely to cost you more than the amount you want to borrow. 

How Much Does a Cash Advance Cost?

The cost of a cash advance depends on a number of factors. For your specific terms, you can check your latest credit card statement or call your card issuer. Here are some things to look out for:

  • Cash advance fee: A percentage of the cash advance amount or a flat fee—depending on your credit card company—might immediately be added to the total you owe.
  • ATM or bank fee: You might have to pay a service charge if you take out a cash advance at an ATM—just like you do for any other transaction. Your bank may charge a fee for taking out a cash advance in person too. 
  • High interest rate: Cash advances often come with a higher annual percentage rate (APR) than purchases you make with your credit card.
  • No grace period: Most credit cards don’t offer a grace period on cash advances. This means that you’ll start accruing interest immediately.

Taking out a cash advance also uses up more of your available credit. This could impact your credit utilization ratio and lower your credit score.

Understand the Fine Print

A cash advance can be a quick way to access funds if you really need to. But according to the Consumer Financial Protection Bureau, it’s a good idea to do some research first. It suggests that you

  • Ask the lender to tell you how much it costs.
  • Ask the lender what the APR is.
  • Borrow only what you can pay back with your next paycheck.

There are other transactions that credit card companies consider to be cash advances—even if actual cash never touches your hands. These include buying casino chips, purchasing lottery tickets or exchanging dollars for foreign currency. So to avoid unexpected fees and higher interest rates, it might be worth asking how your credit card company defines a cash advance.

Alternatives to a Cash Advance on a Credit Card

If you feel uneasy about the cost of a cash advance, there might be other ways to access cash quickly. Just keep in mind that each of those options has pros and cons too.

  • Apply for a bank loan.
  • Dip into an emergency fund.
  • Borrow from family or friends.

You could also try asking your lender for more time to pay your bills. Or you could try talking with a credit counselor to get help.

A cash advance can seem like a quick way out of a tight spot. But it could be more expensive than making a purchase on your credit card. Knowing the potential cost, pitfalls and possible alternatives can help you decide whether a cash advance is the right choice for you.

Learn more about Capital One’s response to COVID-19 and resources available to customers. For information about COVID-19, head over to the Centers for Disease Control and Prevention

Government and private relief efforts vary by location and may have changed since this article was published. Consult a financial adviser or the relevant government agencies and private lenders for the most current information.

We hope you found this helpful. Our content is not intended to provide legal, investment or financial advice or to indicate that a particular Capital One product or service is available or right for you. For specific advice about your unique circumstances, consider talking with a qualified professional.

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