What Is a Cash Advance on a Credit Card?

4 Min Read | Published: March 5, 2024

Man is using ATM outside in alley in evening time

This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

Learn what a cash advance on a credit card is, its advantages, drawbacks, and responsible usage, and when to consider using a cash advance.

At-A-Glance

  • A credit card cash advance is a convenient option when you need cash right away.
  • Credit card cash advances can be useful in the right circumstances.
  • Credit card holders should review the pros and cons before taking a cash advance.

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.

What’s a Cash Advance?

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.

Examples of Transactions That Are Considered Cash Advances

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.

Pros and Cons of Credit Card 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:

 

Pros
Get Cash Fast
Access Via ATM
No New Credit Check Required
Low Minimum Payments

 

Cons
Cash Advance Fees
High Annual Percentage Rate (APR)
Interest Starts Accumulating Immediately
May Impact Your Credit Score (If the Balance Isn’t Paid on Time)

 

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.

What Type of Fees Are Involved With a Cash Advance?

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.

Things to Consider Before Taking a Cash Advance

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.

Frequently Asked Questions

The Takeaway

Credit card cash advances are a simple way to get cash when you need it fast, but you will typically be charged fees and higher interest rates. You’ll also want to make sure you pay the balance off in full and on time. Review your budget and carefully consider whether this is a good option for you.

Headshot of Kevin D. Flynn

Kevin D. Flynn is a financial services provider, business coach, and financial writer. He lives in Leominster, Massachusetts with his wife Evelyn, two cats, and ten wonderful grandchildren.

 

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.

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