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If you need quick access to cash, you may be able to borrow from your credit card with a cash advance. While cash advances can be a convenient way to take out money, they’re an expensive borrowing option due to cash advance fees and high APRs.
A cash advance fee may be a percentage of the amount you borrow or a flat charge, usually whichever is higher. Here’s a closer look at credit card cash advance fees so you know what costs to expect if you borrow from your credit limit.
How do credit card cash advances work?
So, what is a cash advance on a credit card, and how does it work? In a nutshell, credit card cash advances let you take out money against your card’s available credit limit. They’re a type of loan that you can pay back in the same way you pay back your credit card balance.
There are typically three main ways to get a cash advance:
- Withdraw money from an ATM: You may be able to take out a cash advance at an ATM. You’ll use your credit card and a personal identification number (PIN) that you set up with your credit card issuer. Getting a cash advance at an ATM is not the same as using a debit card to take out money from your bank account. You’ll have to pay back the cash advance, along with the cash advance fee and interest charges.
- Request a convenience check: Another option is requesting a convenience check from your credit card issuer. You can fill out your name as the payee if you want to deposit the check into your bank account. Alternatively, you can fill out the check to another person or organization.
- Take out money in-person: If your credit card company has a local branch, you may also be able to get a cash advance in person. Remember to take your ID with you.
Cash advance rates and fees
Although cash advances can be convenient, they tend to be costly due to high interest and fees. Not only do you have to pay a fee to get a cash advance, but you’ll also likely be subject to a higher annual percentage rate (APR) on the amount you borrow compared to your standard APR.
Here’s a closer look at the charges you can expect for a cash advance:
- Cash advance APR: While credit cards already come with a high APR on purchases, the APR tends to be even higher on cash advances. On the Discover it Cash Back credit card, for example, the purchase APR is 17.24% to 28.24%, depending on your creditworthiness, while the cash advance APR is 29.99%.²
- No grace period: Cash advances also don’t have a grace period, so interest starts accruing right away. By contrast, you usually have a grace period of at least 21 days to pay off your purchase charges before the card charges interest.³
- Cash advance fee: The credit card issuer also charges a fee to take out a cash advance. Fees vary by issuer, but a typical cash advance fee is 5% of the advance amount or $10, whichever is greater. The Discover cash advance fee on the Discover it Cash Back card, for instance, has this fee structure.²
- ATM or bank fee: If you take out a cash advance at an ATM, you may also be subject to a fee of a few dollars from the ATM or your bank.
- Separate credit limit: You may only be able to borrow up to a percentage of your credit line. If your card has a $10,000 limit and you have a cash advance limit of 30%, for example, you can only borrow up to $3,000.¹
- No rewards: While some credit cards come with cash back rewards on your spending, you won’t earn any cash back or travel points for taking out a cash advance.
Chime Tip: Taking out a cash advance can also increase your credit utilization or the amount of credit you’re using compared to what’s available to you. A high credit utilization ratio can decrease your credit score. To protect your credit, try to keep yours under 30%.⁴ Learn more about how to repair credit.
How much does a cash advance cost?
The cost of a cash advance will depend on the amount you borrow, your cash advance fee, and your cash advance APR. Here’s an example of how much a $1,000 cash advance would cost with a 5% fee and 29.99% APR, assuming you paid it off over six months.
| Cash advance withdrawal | $1,000 |
|---|---|
| Monthly payment | $181.54 |
| Cash advance fee (5%) | $50 |
| Cash advance APR (28%) | $89.27 in interest |
| ATM fee | $2.50 |
| Estimated time to pay off the cash advance | 6 months |
| Total interest and fees | $139.27 |
Here are the costs you could expect if you paid off that same cash advance over 12 months.
| Cash advance withdrawal | $1,000 |
|---|---|
| Monthly payment | $97.48 |
| Cash advance fee (5%) | $50 |
| Cash advance APR (28%) | $169.79 in interest |
| ATM fee | $2.50 |
| Estimated time to pay off the cash advance | 12 months |
| Total interest and fees | $219.79 |
As you can see, your monthly payments on a 12-month schedule vs. a six-month term go down, but your interest charges nearly double.
Alternatives to a cash advance
If you’re wary of high cash advance fees and interest charges, consider these alternative options for borrowing money:
- Cash advance apps: Cash advance apps offer small-amount, short-term loans that you typically pay back on your next paycheck. MoneyLion, for example, lets you borrow up to $500 with no interest or fees as long as you pay the amount back on time.⁵ However, you can pay a fee if you want instant access to cash. Otherwise, it may take a few days to arrive in your bank account.
- Salary advance: Contact your human resources department to find out if your employer can provide an advance on your next paycheck.
- Third-party payment services: If you need to make a payment to a third party that doesn’t accept credit card payments, there may be services that charge lower fees than your credit card company. Plastiq, for example, will send off payments for you with a 2.9% fee.⁶
- Buy now, pay later services: You may be able to spread out the cost of a major purchase with a BNPL service like Affirm. You’ll need to pass a soft credit check to qualify, which won’t harm your credit.
- Personal loan: You can use a personal loan for almost any expense, including major purchases and debt consolidation. You’ll need to meet a lender’s requirements for credit and income to qualify and may encounter interest rates anywhere from around 7% to 36%. Repayment terms on personal loans often span three to five years, though shorter or longer terms may be available. Loan amounts will also vary by lender but may be anywhere from a few hundred dollars to $100,000.
- Loan from a family member or friend: Borrowing money from a relative or friend may also be an option. Consider drafting up a loan agreement so you’re both on the same page about repayment.
Cash advances are convenient but costly
If you’ve been hit with an emergency expense or other financial difficulty, a cash advance from your credit card can be an easy way to get cash fast. However, it’s crucial to understand what a cash advance is and how interest works before you take one out.
Considering the high costs of a cash advance, you may have more affordable options for borrowing money, such as a paycheck advance app or a personal loan. And if you’re looking to earn some extra cash so you can avoid taking on debt, check out this guide on ways to get paid instantly.