What Is a Cash Advance on a Credit Card?

There are different options available to you when you need cash right away. Getting a loan from the bank is one option. Borrowing it from friends or family is another. Another option is to take out a cash advance on your credit card. Cash advances are a convenient and flexible option, but the tradeoff is that you may pay higher fees and interest on the money.

A cash advance on a credit card happens when you withdraw funds from your available credit card balance. They can take the form of an ATM withdrawal, but even other transactions like payments to friends and family can be considered a cash advance as well. This differs from an ATM withdrawal with your debit card because with a cash advance, you’re borrowing the money against your credit line, not taking it from a bank account. 

Credit card cash advances can offer a convenient solution when you need cash immediately. However, there are some important considerations that you’ll want to keep in mind. With cash advances, there will typically be fees and higher interest charged as well, so you’ll want to consider carefully whether it’s a good option for you.

Using your credit card to withdraw cash at an ATM is categorized as a credit card cash advance. It’s worth noting that there are other types of transactions that may fall into this category as well. These include (but are not limited to) the following: ·     

• Monthly bills paid with a credit card: Credit card issuers may categorize a credit card payment on a monthly bill as a credit card cash advance. That includes auto loans.
• Lottery Tickets: Credit card issuers may consider lottery tickets a cash advance.
• P2P payments: Peer-to-peer payments are the transfer of funds from one individual to another. This type of transaction may also be categorized as a cash advance.  

These are just a few of the transactions that may fall into this category. Be sure to check with your credit card issuer to see what transactions are classified as cash advances.

Cash advances have their pros and cons. The primary advantage is convenience, if you have a credit card that allows a cash advance, then you can gain access to the money right away. The main disadvantage is the cost of doing it. Here’s a look at some of the pros and cons of credit card cash advances:

You’ll also want to consider how the cash advance might impact your credit. If the balance goes unpaid for too long, it may impact your credit score.

Credit card companies typically charge a fee for credit card cash advances. These fees are typically either a flat rate or a percentage of the cash advance amount. You will typically be charged a higher interest rate for a cash advance as well, and interest may start to accrue right away. Check with your credit card provider for more information. There may also be an ATM surcharge for withdrawing the money at that location. Check your provider’s website to see if there are any ATMs nearby where you can avoid that fee.

Credit card holders should review their budget before taking a cash advance. It’s also important to evaluate the need for funding. Credit card cash advances may be good to have available when you need emergency funds, but you’ll want to weigh up the pros and cons carefully to make sure there isn’t another, better way to acquire the cash that you need.