With all of the convenient payment methods available today—credit or debit card, Apple Pay™, PayPal® and more—there are still times when nothing but cold, hard cash will do. You may need cash to pay for an unplanned taxi ride, a trip to the farmers market or a traffic ticket in a town that doesn’t accept credit cards.

When you must have cash, but don’t have enough money in your checking account to make a withdrawal, a cash advance from a credit card is another option. However, it’s an option you should think long and hard about. It can be a costly alternative, so you’ll want to be sure it’s really the best option available.

On the surface, a cash advance on a credit card is similar to a cash withdrawal with a debit card. You use your card at an ATM and receive cash, but the similarities end there. With a debit card, you withdraw your own money; with a credit card, you receive borrowed money, which you must pay back. The two types of transactions have important differences that can make a cash advance far more costly.

 Consider these three ways a cash advance may be more costly than you realize:

  • Most credit card issuers charge a cash advance fee every time you take a cash advance. It’s often in the neighborhood of 2% to 5% of the transaction amount and may also have a flat minimum, such as $10.
  • The interest rate charged on cash advances is typically higher than the rate for purchases made with the card—average annual percentage rates (APRs) are about six points higher, according to a survey by CreditCards.com.
  • There is usually no grace period for cash advances. For purchases, you may have 25 days (or another number of days) to pay off the balance before interest charges accrue. Interest typically begins accruing immediately on cash advances.                                                                                                                                                         

Pros and Cons of a Credit Card Cash Advance

Pros

Cons

Instant access to cash

Usually no grace period—interest begins accruing immediately

Convenient—as close as your nearest ATM

Typically higher interest rate than for purchases

Access to money without an additional loan application or credit check

Generally there is a cash advance fee (on top of any ATM fees)

Easy way to get local currency in a foreign country

Cap for cash advances may be well below your credit limit