What is a cash advance on a credit card?
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 one type of cash advance.
Read on to learn more about how a cash advance on a credit card works, how much it may cost and whether there’s an alternative that could be better for you.
- Cash advances allow cardholders to borrow money against their existing credit line.
- Cash advances may have higher interest rates than typical credit card purchases do.
- There may be additional fees associated with cash advances.
- There are multiple ways to get money through cash advances, including at banks, at ATMs or by using special checks.
- Other transactions may be considered cash advances, including using your credit card to transfer money to friends using apps such as PayPal, Venmo or MoneyGram; pay a debt, such as a car loan; use a third-party bill pay service; buy casino chips or lottery tickets; or exchange dollars for foreign currency.
What does ‘cash advance’ mean?
A cash advance lets you borrow a certain amount of money against your credit card’s line of credit. You usually pay a fee for the service.
How does a cash advance work?
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. And a cash advance can come with fees and higher interest rates than typical credit card purchases do. So while it may be convenient, it can be more expensive than making a purchase on your credit card.
How to get a cash advance from a credit card
Depending on your issuer, you can get money through a cash advance a few ways:
- At your bank: You can ask your teller for a cash advance by using 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, naming yourself as the payee. 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.
What other transactions might be considered cash advances?
Using your credit card to get a cash advance at a bank or ATM is pretty straightforward. But there are other types of money transfer, gambling and quasi-cash transactions that might be classified as cash advances—depending on your issuer.
If you use your credit card for these transactions, you may be charged a cash advance fee and a potentially higher cash advance interest rate. Here are a few examples of transactions that may be a cash advance:
- Peer-to-peer money transfers through apps, such as PayPal, Venmo and MoneyGram.
- Using your credit card to pay a bill, such as an auto loan, through a third-party bill pay service—rather than paying a merchant directly.
- Wire transfers.
- Traveler’s checks.
- Money orders.
- Foreign currency exchanges.
- Lottery tickets.
- Gaming chips and other wagers.
Check your issuer’s policy to learn more.
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 credit card account terms or contact your issuer. But keep in mind that there are typically fees associated with a cash advance.
What’s a cash advance fee?
A cash advance fee is basically a service charge from your credit card issuer. Depending on your issuer, it can be a percentage of the cash advance amount or a flat fee. It could be taken out of the cash advance when you receive it or posted to your credit card bill.
What’s a cash advance APR?
When it comes to credit cards, interest and annual percentage rate (APR) are usually the same thing. Cash advances often come with a higher APR than any purchases you make with the same credit card.
According to the Federal Deposit Insurance Corporation, the APR could be twice as high. Plus, most credit cards don’t offer a grace period on cash advances. This means that you’ll likely start accruing interest immediately.
What other fees are associated with a cash advance?
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.
A cash advance will also use more of your available credit. This impacts your credit utilization ratio. And depending on how much you borrow, that could lower your credit score.
When you might consider using a cash advance
A cash advance can be a quick way to access funds if you really need to. But doing the following might be helpful:
- Check your account terms to find out the APR for cash advances, plus any other fees you could be charged.
- Borrow as little as possible and pay it off as fast as you can.
Alternatives to a cash advance on a credit card
If you’re undecided about a cash advance, there might be other ways to access cash quickly. Here are a few options you could consider:
- Use a debit card to access funds from your checking or savings account.
- Apply for a bank loan.
- Dip into an emergency fund.
- Borrow from family or friends.
Understand the fine print
A cash advance can seem like a quick way out of a tight financial spot. But it could be more expensive than making a purchase on your credit card. It’s important to fully understand how cash advances work and to use them responsibly. And knowing the potential costs and possible alternatives can help you decide whether a cash advance is the right choice for you.
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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