Sometimes life happens and you might need cash fast. If you carry a credit card, you may be able to use it to access cash. This cash advance lets you withdraw cash against your credit limit in the form of a short-term loan. You may wonder, though – how do you get cash from a credit card, and is a cash advance a good idea? We’ll cover what cash advances are, how they work, the pros and cons of using them, and alternatives to consider. Then, you can decide whether a cash advance is right for your situation.
Key Takeaways
- A credit card cash advance allows you to convert a portion of your credit line into cash.
- Cash advances typically come with high interest rates and fees.
- You don’t need a credit check or a specific credit score to access a cash advance from your credit card.
- You may have more affordable alternatives to a cash advance, including using your savings or a low-interest personal loan.
How Does A Cash Advance Work?
A cash advance provides nearly instant cash from your credit card but comes with fees, a high annual percentage rate (APR) and no grace period for interest accrual.
Keep in mind that you aren’t allowed to convert your full credit line into cash. Only a portion of your limit – often between 20% and 30% – is allowed, depending on the lender. Granted, this may not be enough to cover your needs. For example, say you want to borrow $5,000 for an emergency and have a credit card with an $8,000 credit limit and no current balance on it, but the card has a 20% cap on cash advances; you would only be able to access $1,600, not the full amount you need.
How can you tell what the limits are on your card? You can typically find information about cash advances on your monthly statement, online or on your credit card app or by calling your credit card issuer.
Cash Advance Limits Vs. Overall Credit Limits
Your credit limit is your total spending limit – the amount that your credit card issuer approves you to borrow. A cash limit, meanwhile, is what your credit card issuer allows you to take out as cash against your credit line, and it’s usually 20% to 30% of your total credit limit. If you go over your cash advance limit, your request will likely be declined. When you go past your credit limit, you risk getting the charge declined as well.
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Is A Cash Advance A Good Idea?
If you need money in a hurry, can afford the fees and interest, and can pay it back quickly, a cash advance, while not ideal, could work. But in many other situations, a cash advance carries some major drawbacks. Here are some pros and cons to consider.
Pros
- No credit check needed: You’re already vetted for a cash advance by your current credit card issuer.
- Fast payment: Youraccess to cash is immediate, with no waiting times for your money. So if you need money in a hurry, this is one way to get it.
Cons
- Fees: If you read the terms and conditions of a cash advance in your credit card agreement, you might find that the transaction fee typically adds 3% to 5%, or a flat minimum of $10 – whichever amount is greater, depending on the amount of the cash advance.
- High interest rates: The APR on a cash advance is not the same as the APR on your credit card; the cash advance rate could range from 24% to 30% and is typically higher than the purchase APR.
- No grace period: Unlike your credit card payment, interest accrues the minute you take out the money, not after your billing cycle closes for the month.
- Risk of hurting your credit score: If you borrow the maximum allowable cash advance, it could raise your credit utilization ratio and negatively impact your credit score.
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How Much Does A Cash Advance Really Cost?
Let’s say you need $500 in cash, fast. You take out a $500 cash advance from your credit card, with an upfront fee of 5% and an APR of 29.99%. Let’s review how much a cash advance of $500 will actually cost you in the long run.
- 30-day payoff: If you pay off the cash advance within 30 days, you would pay $538 total, including around $13 in interest and the $25 fee.
- 6-month payoff: If you wait and pay it off in 6 months, you’ll pay approximately $45 in interest plus the $25 fee. In this scenario, that $500 you borrowed will ultimately cost you about $570.
- 1-year payoff: If it takes you a year to pay off the advance, you could end up paying around $85 in interest plus the $25 fee. That original $500 you borrowed would cost you around $610.
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How To Get Cash From Your Credit Card
If you decide to take out a cash advance despite the risks and high costs, you can usually access your money pretty easily. Here’s how to get cash from a credit card:
- ATM: Your credit card may have a four-digit PIN you can use to access cash. Check with your credit card company for details on how to set up or find your personal identification number if you don’t know it.
- Bank or credit union: You may be able to withdraw cash at a participating bank or credit union using a government-issued ID and your credit card.
- Convenience check: Some issuers send convenience checks when you open or use your card. If you received these checks, you can write yourself a check and deposit it into your account.
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What Are Hidden Cash Advances?
Sometimes, credit card issuers and other businesses label certain transactions as cash advances in a way that can be confusing. These types of purchases or cash advances carry their own fees and high APRs. Some other types of cash advances include:
- Purchasing money orders and traveler’s checks with your credit card
- Wire transfers
- Cryptocurrency purchases on most major exchanges
- Purchasing foreign currency
- Gambling using casino chips, lottery tickets or other forms of betting
- Peer-to-peer transfers, like Venmo or Zelle, depending on your issuer
Cash Advances And Your Credit Score
The good news is that using a cash advance doesn’t automatically impact your credit – it isn’t even reported as a cash advance. The risk for some borrowers comes from accessing a larger amount of high-interest credit in cash, which can trigger problems if it’s not repaid on time.
Your credit utilization is often the first part of your credit profile that’s impacted: A cash advance raises your overall debt balance, increasing utilization and potentially hurting your credit if it goes over 30%, according to myFico.
In addition, if you can’t afford the higher APR or stay on top of the accruing interest and minimum payments, you risk missing payments, and that can drop your credit score, too. Missing a payment can significantly damage your credit score, with the impact varying based on your overall credit profile. Because of that potential pitfall, it is best to pay back what you owe in full, right away. The longer you wait, the more interest you’ll accrue on the cash advance.
Alternatives To A Cash Advance
Because cash advances are expensive, there are alternatives you can consider if you need money.
Emergency Fund
Ideally, when you need cash, you can tap your emergency fund or, if you don’t have one, your savings account.
Borrowing From Friends and Family
It might be hard to ask, but it will cost less to ask a good friend or family member for money than to pay the high APR on a cash advance.
Personal Loan
If your credit score is high enough to qualify for good terms, the interest rate on a personal loan may be lower than on a cash advance.
Salary Advance
If possible, ask your payroll manager or boss about a salary advance, if offered by your workplace. Another alternative is using a wage-advance app – but pay attention to fees and the risk of being locked into a subscription; keep in mind that the Federal Trade Commission is investigating some of these companies.
FAQ
A payday loan, one type of hardship loan, is a cash advance on your paycheck from a storefront or online lender. You’re expected to pay back the loan as soon as you are paid, but these loans are risky; some states even ban them because of the exorbitant interest rates, according to the Consumer Financial Protection Bureau.
The Bottom Line: Cash Advances Are Convenient But Costly
Credit card cash advances can be convenient: there’s no credit check, and the money is readily available if you have a sufficient line of credit on your credit card. However, the upfront fees, lack of a grace period and high interest rates make it an expensive option. Having an emergency fund or shopping for a low-interest personal loan tends to be a better option if you need cash unexpectedly.
Compare personal loan options to find a lower-cost alternative to a cash advance.
Maya Dollarhide
Maya Dollarhide is a freelance writer with over a decade of experience covering personal finance topics. Her writing credits include AARP, Bankrate, Investopedia, CNN.com, Yahoo Finance and Lending Tree. She enjoys writing articles and producing multimedia content that helps individuals and families make informed decisions about their money, from mortgages and home loans to reducing credit card debt and saving for retirement. She has also created educational materials for use in schools to teach young people about personal finance, from opening up a bank account to saving for college and beyond.
