What is a cash advance?
A cash advance is when you use your credit card to borrow money against your credit card’s available credit limit.
Have you ever found yourself in a situation where you needed cash but couldn’t get it? Maybe you were shopping at a cash-only store or facing a one-time emergency. In such cases, a cash advance may feel like your only option.
A cash advance is a short-term loan that allows you to borrow cash against your credit card’s available credit limit. While they’re convenient in a pinch, you should only use cash advances as a last resort due to their high-interest rates and fees.
Below, we’ll explain everything you should know about cash advances, including how they work, where to get them, and whether or not a cash advance is the right option for you.
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How does a cash advance work?
A cash advance is a short-term loan you borrow using your credit card. It’s similar to withdrawing cash from an ATM with your debit card, except you’re borrowing money against your credit card’s line of credit rather than your bank account balance.
Cash advances come with higher interest rates and fees than regular credit card purchases. And unlike regular credit card purchases, credit card cash advances start incurring interest on the withdrawn amount as soon as you take the money out.
The maximum amount you can get on a cash advance is usually a percentage of your credit card’s total limit. For example, if your credit card limit is $5,000 and your card’s cash advance limit is 30%, the maximum cash advance would be $1,500.
Once you get a cash advance, the total amount you borrowed (plus the cash advance fee) is deducted from your available credit balance. You’ll see the cash advance on your credit card statement.
| Pros | Cons |
| Fast access to cash when you need it | High fees and interest rates, which can add up quickly |
| No need for collateral or a credit check | Can negatively impact your credit score if you don’t pay the balance off quickly |
| Can be more convenient than other forms of credit in some situations | Can lead to a cycle of debt if you rely on cash advances too frequently |
How to get a cash advance from a credit card
To get a cash advance from a credit card, you have three options:
- At an ATM: Insert your credit card and select the cash advance option. Keep in mind that you’ll need your credit card pin. You can call your credit card issuer or request your PIN online if you don’t know yours.
- In person at your bank: Go to your bank and request a cash advance at the teller window. You won’t need a PIN for this method, just your proper identification.
- Convenience check: Some credit card companies may offer convenience checks that you can use for cash advances. If they do, you can fill one out like a regular check and name yourself the payee. Then, you can deposit it at your bank.
A less common option is to get a cash advance over the phone. Not all credit card companies allow this, so call your issuer to confirm.
How much are cash advance fees?
Cash advance fees vary by lender and the amount of cash borrowed, but they typically range from $10 or 2%-5% of the total amount borrowed – whichever is greater.¹
The cash advance fee and actual cash advance amount are deducted from your credit limit. For example, if your cash advance fee is 3% and you request a $2,000 cash advance, the total amount deducted from your credit card would be $2,600 ($2,000 cash advance + $60 fee).
If you get a cash advance from an out-of-network ATM, you’ll also pay an ATM fee – the average ATM fee costs $4.64.²
Finally, you’ll begin accruing interest on a cash advance as soon as you take it out – there’s no grace period as you have with regular credit card purchases.
How do you pay back a cash advance?
When paying back a cash advance, you’ll typically need to make payments directly to the lender. Because of the higher, separate APR on a cash advance, your cash advance balance is also separate from your regular credit card balance.
Paying off the minimum payment on your credit card may not be enough to pay off the cash advance balance. Check with your lender or credit card company for specific instructions on paying off your cash advance.
Chime tip: If you can’t pay off the balance right away, consider working with your lender or credit card company to set up a payment plan that works for you.
Cash advance alternatives
Since cash advances should only be a last resort, it’s wise to consider other options first. Here are some alternative ways to get cash in a pinch:
- Personal loan: A personal loan may be a more affordable option than a cash advance, as they typically have lower interest rates and longer repayment terms. However, you’ll need good credit to qualify for a personal loan, and it may take longer to get the funds.
- Balance transfer: If you have a credit card with a lower interest rate, you may be able to transfer the balance from your high-interest cash advance to the other card.
- Ask a friend or family member: Borrowing money from a friend or family member may be an option if you need cash quickly. However, you’ll want to make a clear agreement and repay the loan as soon as possible to avoid damaging your relationship.
Be sure to consider all your options in case there’s a more affordable way to access the cash you need.
Is a cash advance the right choice for you?
Cash advances, though not ideal, can be beneficial for some. A cash advance is a quick and easy way to access funds for urgent needs. Before taking a cash advance, be aware of all the fees, interest, and costs associated with a cash advance.
As an alternative, you can consider taking out a loan, even with bad credit.
FAQs about cash advances
Does a cash advance hurt your credit score?
Taking out a cash advance can hurt your credit score if you don’t pay it off quickly and the balance grows over time.
Is a cash advance a good option for emergency funding?
While a cash advance can provide fast access to cash, it’s not an ideal option for emergency funding due to the high fees and interest rates associated with this type of credit.
How should I pay off a cash advance credit card?
It’s best to pay off a cash advance credit card as soon as possible to avoid accumulating high-interest charges and fees. You should aim to make at least the minimum payment due each month to avoid late fees that can negatively impact your credit score.
What is a cash advance fee?
A cash advance fee is a one-time fee charged by the credit card company when you take out a cash advance, typically ranging from 2-5% of the amount borrowed.
What is a cash advance APR?
A cash advance APR (annual percentage rate) is the interest rate you’ll be charged on your cash advance, typically much higher than the APR for regular purchases made with your credit card.
