Your credit cards serve as valuable tools in your financial portfolio. Often, you’ll use your credit card for a planned purchase to earn rewards or to buy something online. Sometimes, your credit card provides you a bridge until payday, when you plan to pay off that bag of groceries you put on your card. Your credit card probably also allows you to access cash at an ATM should you need emergency money, but it shouldn’t be your first choice if you have other sources of quick cash.
Many credit cards offer the option to get cash advances, and when you choose that option, you’re essentially taking a loan against your open line of credit. Some banks limit the amount of cash you can take, but no matter how many $20 bills come out of the ATM, you’ll pay an upfront fee and a higher interest rate. The amount of each is spelled out in the credit card agreement that comes with your card, but who saves those? Before taking a cash advance, it’s worth a call to the bank to find out just how much that cash will cost you.
Keep reading to learn more about this banking fee and others you might want to avoid.
What Is a Cash Advance?
Any time you use your credit card, you’re taking out a loan to make a purchase. With a cash advance, you’re just removing the purchase part of that equation and getting the cash directly. That might not make a ton of sense as long as you have cash in your checking account, but plenty of people find themselves in a short-term pinch between paychecks and have limited options.
A cash advance isn’t your last resort — but it’s one of the less-desirable ways to get your hands on money on short notice. The last resort? A payday loan, which Forbes Advisor said could come with fees that equal an annual percentage rate of up to 400%.
How To Get Cash From a Credit Card
Your options will likely vary depending on your credit card company and issuer, but the most common methods for getting a cash advance are either through a check or at an ATM. Your credit card issuer might have sent you a check. If that’s the case, you’ll fill out the amount you need, up to the limit of your available credit, and deposit it into your checking account. If you’ll be getting the money at an ATM, you’ll need a PIN — just as you would with your debit card. Your issuer can assist you in setting up a PIN if you don’t have one, or you might be able to set one up by signing in to your credit card account online.
Once you have your PIN in hand, you can head to the ATM to get your cash advance. The process is similar to what you do when you withdraw cash using the debit card linked to your bank account.
How To Get a Cash Advance at an ATM
To get a cash advance, you’ll do the following:
The Cost of a Cash Advance
Convenience and urgency usually come at a cost, and that’s true with the fees you’ll pay for a cash advance.
“With a cash advance, your credit card company is essentially lending you money and charging your account,” Jason Gaughan, the senior vice president of consumer card products at Bank of America, said in an article on the bank’s Better Money Habits website. “The charge will likely cost you; cash advances generally have a transaction fee and a higher annual percentage rate.”
Plus, in some cases, there are ATM fees to pay, and Better Money Habits cautions that your card issuer could begin assessing interest at the time you take out the money. There’s no grace period.
So just what are the fees and interest rates for a cash advance? They vary by bank, but here are some examples:
- Wells Fargo Active Cash card: 27.49% annual percentage rate, plus a fee of $10 or 5% of the advance (whichever is greater)
- Capital One VentureOne card: 24.99% annual percentage rate, plus a fee of $10 or 3% of the advance (whichever is greater)
- KeyBank Key2More Rewards card: 23.99% annual percentage rate, plus a fee of $10 or 5% of the advance (whichever is greater)
Ways To Avoid a Cash Advance
When you know you’re running low on cash, take action immediately to save the funds you have until your next payday. It requires both planning and willpower.
Here are some steps you can take to avoid taking a cash advance:
- Stay on top of your finances. Your online banking settings could give you the option to be alerted when your account balance runs low. That will help you to make decisions about spending before payday.
- When you know you’re running low on cash, reconsider your purchases and buy only what is essential for now.
- You might have some upcoming essential expenses that must be paid in cash and others that can be paid by card, such as gas. If using your credit card will be inevitable, pay for the gas with your credit card instead of taking a cash advance. You’ll pay a lesser interest rate and will avoid the extra fees.
- Ask some of your creditors to extend your payment deadline. Your power company, for example, might be willing to extend your payment over time. It doesn’t hurt to ask.
The Bottom Line
The clear advantage of a cash advance is the convenience. Life is often full of unexpected surprises that you’ll need cash to resolve, and having a backup plan — such as a rainy day fund — for when you need cash can be very helpful.
But if you don’t have emergency money set aside, a cash advance from your credit card is one alternative, and you can weigh the pros and cons. However, the cost of cash advances means that they should be just about your last resort. Cash advances typically come with a higher APR than normal purchases, and that’s on top of the initial fee that can run as high as 5% and a potential ATM fee.
All in all, if you have no other option, credit card cash advances can be a valuable convenience to help you bridge a period when you’re low on cash, but they’re a costly alternative that can and should be avoided with better planning and budgeting wherever possible.
Joel Anderson contributed to the reporting for this article.
Information is accurate as of March 15, 2022.