Key Takeaways
- A cash advance lets you borrow money against your credit card’s limit.
- Cash advances often come with high fees and interest charges that begin immediately.
- Lower-cost alternatives include paycheck advance loans, personal loans, and borrowing from friends or family.
Sometimes you’re faced with an unexpected expense and need cash immediately. One option to help cover your expenses is taking out a cash advance – a short-term, high-interest loan that allows you to borrow money from your credit card issuer.
It’s essential to understand what you’re signing up for before taking out a cash advance. Understanding what cash advances are, how they work, where to get them, and your alternative options will help you make an informed decision.
How does a cash advance work?
When you take out a cash advance, you borrow money against your credit card’s available credit limit. Your credit card issuer charges a fee and applies interest to the balance from day one, unlike regular credit card purchases, when you have a grace period.1 You repay the cash advance the same way you’d pay your credit card bill.
How to get a cash advance on a credit card
Depending on your credit card provider, you can get a cash advance online or from an ATM.
- At an ATM, you’ll use your credit card to withdraw cash – the same way you would with your debit card.
- Online, you can request a cash advance to be deposited into a linked checking account. You can then withdraw that money using your ATM card.
What is a cash advance fee?
A cash advance fee is the cost of borrowing money from your credit card issuer. Credit card companies either charge a flat fee or a percentage of the cash advance amount, whichever is greater. This fee is either deducted from the total cash advance amount or added to the balance.
You may be charged an additional fee if you use your credit card to get a cash advance at an ATM. Use an in-network ATM to avoid this extra fee.
How much does a cash advance really cost?
A cash advance fee is just one part of the total cost. Other factors include:
- Cash advance APR
- The time it takes to repay the loan
- Whether you use an in-network or out-of-network ATM
For example, you might take out a $1,000 cash advance with the following terms:
- Cash advance fee of 3%: $30
- Cash advance APR of 29.99%: $89.27 in interest
- Time to pay off balance: 6 months
- Monthly payment: $181.54
- ATM fee: $0
If you pay off the balance within six months, you’d have paid $119.27 in interest and fees.
Pros and cons of a cash advance
The primary benefit of a cash advance is immediate access to funds when you need them. There’s no need to apply or go through a credit check like you would if you applied for a loan. And since you’re borrowing against your credit limit, there’s no collateral involved.
However, cash advances have several downsides to consider. They typically have high interest rates and fees that increase the cost of borrowing. They can also affect your credit score by increasing your credit utilization ratio. You may also be limited in the amount you can withdraw.
Here’s what you need to know about cash advances before taking one out.
| Pros | Cons |
|---|---|
| Easy access to cash from an ATM or online, no credit check required | High interest rates and fees that begin accruing immediately |
| Fast cash when you need it, without the lengthy approval process | Can increase your credit utilization, which may lower your credit score |
| No collateral or income verification required because you borrow against your credit limit | Most cards cap the amount you can withdraw, limiting how much you can access |
| Convenient for emergencies when other options are unavailable | No grace period – interest starts right away and adds up quickly |
Alternatives to cash advances
Cash advances should be a last resort, so consider other options first. Here are some alternative ways to get cash in a pinch.
- Paycheck advance: At Chime, MyPay lets you get up to $500 of your pay before payday.^ There are no mandatory fees, no interest,~ and no credit checks. Just open the Chime app, see how much of your pay you’re eligible to take as an advance ahead of payday, and select how much you want.
- Personal loan: In many cases, taking out a personal loan is more affordable than getting a cash advance because it offers better borrowing terms.
- Instant loan: This is a type of small, short-term personal loan for use in emergencies. Learn more about instant loans to see if it’s a good option.
- Overdraft protection: If you need a small cash advance, a service like Chime’s SpotMe can help. Chime spots you money fee-free when you overdraw your account by up to $200.
- Balance transfer: If you need to take out an expensive cash advance, consider a balance transfer credit card with a low APR, making it easier to pay off the debt.
- Borrow money: Asking a trusted person for money can be uncomfortable, but it’s often better than taking on high-interest debt from a lender. If you choose to borrow money from a family member or friend, establish a clear repayment plan and pay it off promptly.
Be sure to consider all your options to see if there’s a more affordable way to access the cash you need.
Types of cash advances
All cash advances are fairly similar – you borrow money and pay fees and interest in return. The primary differences between the types of cash advances are how you get the money and how much you’ll have to pay for it.
The following table compares the typical transaction fees and APRs for the four main types of cash advances.
| Type of Cash Advance | Typical Transaction Fees | Typical APR |
|---|---|---|
| ATM | 3%–5% of the borrowed amount¹ | 24.99%–29.99%² |
| Credit card | 3%–5% of the borrowed amount¹ | 24.99%–29.99%² |
| Payday loan | $10–$30 for every $100 borrowed³ | Up to 400%³ |
| Merchant | 10%–20% of daily receipts⁴ | Up to 350%⁴ |
ATM cash advance
An ATM cash advance is the most common type. You use your credit card to withdraw money from an ATM, and your credit card provider charges you a one-time cash advance fee.
You begin accruing interest on the first day, and it appears on your credit card bill at the end of the statement period. Approval odds are high: Unless your card is maxed out, you should be able to take out a cash advance. However, fees and APRs are high.
Credit card cash advance
Some credit card companies will send convenience checks that you can use for cash advances. You can deposit these pre-approved checks or give them to someone who can’t accept cash or card payments.
Contact your credit card company to request a convenience check to be mailed to you. You can fill it out for the amount you need and deposit the check at your bank. Your credit card company will likely charge substantial fees and interest for a cash advance.
Payday loan
A payday loan, also known as a cash advance loan, is a short-term financing option that can tide you over until your next paycheck. These loans are easy to get since they often don’t require a credit check. However, they come with APRs of up to 400%.³
These high rates increase your potential of getting stuck in a debt cycle, so it’s best to explore less expensive options first before turning to payday loans. For example, compared to payday loans, personal loans are much cheaper.
Merchant cash advance
Small business owners may be eligible for a merchant or business cash advance. This type of cash advance allows you to borrow a lump sum in exchange for a percentage of your business’s future daily debit or credit card sales, plus fees.
You can often get a merchant cash advance even if you have poor credit. If you qualify, you can receive funds as early as the next day. However, this option generally comes with high fees and an APR of up to 350%.⁴
Need cash to get you through to payday?
Receiving cash advances can be a slippery slope into debt. Instead, consider options that help you receive your paycheck potentially earlier. Otherwise, a personal loan might be a less risky alternative.
If you need help figuring out whether that alternative is right for you, here are popular reasons for getting a personal loan.
Frequently asked questions
What is a good cash advance APR?
Traditional cash advances typically range from 24.99% to 29.99% APR.² Aim for a cash advance on the lower end of that range to get the best deal.
What is the difference between a cash advance and a loan?
Cash advances are short-term, high-cost borrowing options that you can get from a credit card lender. Personal loans are usually more cost-effective, with a lower interest rate than you can get from your bank or credit union.
Can I get a cash advance with bad credit?
If you’ve already been approved for a credit card, you can request a cash advance even if your credit is less than stellar. However, qualifying for a credit card is harder with bad credit, so you’ll need to shop around and work on improving your credit before applying.
How quickly do I need to repay a cash advance?
Generally, there’s no deadline for how long you have to repay a cash advance. However, the longer it takes you to repay, the more interest the advance will accrue, increasing your overall borrowing cost.