Credit Card Basics

What Is a Cash Advance?

What happens when your transmission gives out in a rustic mountain town, where the only repair shop for miles doesn't take credit cards? Or when you come across a once-in-a-lifetime restaurant that only deals in hard currency? A cash advance from a credit card account can be a real boon when you need quick access to money.

A cash advance is a way of borrowing money from a credit-card account. Instead of using the credit on the account to buy something, you use it to get cash, which you can then spend on alpine auto repairs, cash-only eateries, or anything else you need.

Getting a cash advance is a little trickier than making an ordinary credit card purchase. It can also be more expensive, and could even harm your credit scores. Here's how to use this potential lifesaver without it weighing you down.

How Cash Advances Work

Depending on the terms of your cardholder agreement, you may be able to borrow some or all of the total amount available on your card as a cash advance. You can do so several different ways: in-person at a bank or credit union; at an ATM; or using "convenience checks" provided by the card issuer.


Simply show your credit card and a valid ID at the bank or institution and request your cash withdrawal. They may charge you a fee for the service. (More on fees and other cash-advance costs below.)


It's just like withdrawing cash from a debit card: insert your credit card into the machine, enter your personal identification number (PIN), and withdraw your cash advance.

Many ATMs have limits on the amount of cash they can dispense in a single transaction, and in the number of withdrawals per day. So if you need an advance of more than a few hundred dollars, you may need to take it out in installments (likely getting hit with a fee each time) or wait until normal business hours to get an in-person advance.

Also, cash-advance PINS are not automatically included with many new credit cards. If no PIN was included with your card, you can request one using the card's customer service phone number or website. Just like with debit cards, PINs are typically issued only by postal mail, so you should request one at least a couple of weeks ahead of time if you think you might need an ATM cash advance while traveling.

Convenience Checks

Some card issuers provide special checks along with each credit card to make cash advances easy. Convenience checks work just like ordinary checks: Fill them out for the desired amount, sign and endorse them, and you can cash or deposit them at your bank or credit union.

The Cost of Convenience

Access to a quick cash loan can come at a price. Just how steep depends on the fine print in your cardholder agreement. Cash advances are often issued at higher interest rates than standard card purchases. Cash-advance APRs can run six or more percentage points higher than the interest rates on standard purchases.

Interest rates aren't the only way cash-advances can rack up costs. Whether any of these additional costs apply is detailed in your cardholder agreement:

  • Your card lender may charge up-front fees of $20 or more, each time you take a cash advance.
  • The bank or credit union where you get the cash advance may also charge service fees, either via an ATM or when they process an in-person cash advance.
  • With a cash advance, interest charges may begin accumulating immediately, without the benefit of the one-month grace period you get to repay regular credit charges before they are hit with interest charges.
  • If you take out a cash advance on a card that already has an outstanding balance, your payments may be used to repay the purchase balance (at its lower interest rate) before they are used against the costlier cash-advance balance.

For example, consider a cash advance of $1,000 taken on a credit card with an outstanding purchase balance of $1,200. Let's say:

  • The APR on the outstanding balance is 16%;
  • The APR on the cash advance is 21%;
  • The advance comes with a $50 up-front fee from the card issuer, plus a $20 service fee from the issuing institution; and
  • Interest on the total cash advance-amount of $1070 ($1,000 plus $70 in fees) begins accruing as soon as the loan is issued at an APR of 21%.

If you have $400 a month available to pay off that account, it'll take four months before you make a dent in the cash-advance portion of your balance. And during that time, accumulated interest will bring the balance on the cash advance of $1,000 balance to roughly $1,140—before you even start paying it down!

Of course, if you pay less per month, or charge additional purchases to your account, the cash-advance balance can increase even further.

Cash advances are convenient, but pricey.

Credit Score Concerns

Cash advances add to your outstanding card balances the same way credit purchases do. A total outstanding balance that exceeds about 30% of your card's spending limit can make your credit score go down.

Because cash advances tend to accumulate interest more quickly than regular purchases and take longer to pay off in full, keeping your cash-advance balance even lower than that 30% level is a good goal.

Suggestions for Managing Cash Advances

  • Try to avoid the need for a cash advance altogether, by creating an emergency cash fund in an account that's accessible via check or debit card. ATM and check-cashing fees may still apply when you're far from home, but you'll avoid the more troublesome interest charges.
  • Read all cardholder agreement(s) carefully to fully understand the procedures and costs associated with taking cash advances.
  • Try to avoid taking a cash advance on a card with a high balance.
  • If you have more than one card that offers cash advances, choose the one with the lowest cash-advance interest rate and/or the one that you can pay off in full most quickly.
  • Keep an eye on your credit score so you'll be aware of any drop in score that follows a cash-advance, and pay down the debt as quickly as possible to hasten your score's recovery.

Access to a credit card cash advance can be just what you need when you're in a pinch. If you use it wisely, you can avoid getting squeezed.