Card: A Full Guide

Life is full of surprises—and not all of them are welcome. Unexpected financial emergencies can leave you needing cash in a hurry, and that can be a problem if you don’t have enough in the bank. One option for covering an unforeseen cost may be getting a cash advance on your credit card. This can allow you to access the money you need quickly, without needing to go through a loan application process or put up collateral. That said, a credit card cash advance is a form of debt, and it can come with fees and high interest rates that could undermine your long-term financial stability if you don’t pay it back right away. Learn how to get a cash advance on a credit card, along with the pros and cons you’ll want to consider before taking on the debt.    

What is a cash advance on a credit card?

Most of the time, you use a credit card to make a purchase directly at a store or online. But many cards will also allow you to borrow cash as well, adding the amount to your credit card balance. Unlike typical transactions, cash advances come with their own set of rules, fees, and interest rates.

Cash advances provide immediate cash access. Simply visit an ATM or request a cash advance through your bank or financial institution. You’ll want to keep in mind that cash advances usually have a separate credit limit, usually lower than your credit limit for purchases. 

While convenient, cash advances have unique costs. The interest rates for cash advances are generally higher than those for regular credit card purchases. And unlike the interest on regular purchases, which usually doesn't start accruing for about 21 days, interest on cash advances is often assessed immediately. Additionally, cash advances usually entail a fee—either a flat rate or a percentage of the amount withdrawn. All that means that getting a cash advance on your credit card will likely wind up costing you, and you’ll have to pay back more than the amount of cash you borrow. 

Pros and cons of using a credit card cash advance

The primary advantages of getting a cash advance on a credit card are speed and convenience. In most cases, you can just stop by your bank or an ATM and get the cash, as long as you have enough available on your cash advance credit limit. Cash advances are a type of loan, but unlike other types of loan, you don’t have to wait for an application to be approved or provide collateral. Quick and easy access to cash can be a real lifeline in an emergency situation when you don’t have the funds you need for a truly necessary, immediate purchase. 

However, the convenience of a cash advance also comes with significant drawbacks:

• High interest rates: Credit card cash advances often come with a higher interest rate than the rate for purchases. Even if you have a 0% interest rate on your credit card, you’ll likely have to pay interest on cash advances. 

• Cash advance fees: Most credit cards charge a one-time fee when you get a cash advance, usually between 3% and 5% of the amount you borrow. For instance, a $500 cash advance might come with a fee of $15-25. 

• No grace period: When you make a purchase with your credit card, you usually have about 21 days to pay it off before interest is assessed. With a cash advance, you’ll start accruing interest on the money immediately. 

• Lower credit limit: Many credit cards have a separate credit limit for cash advances that’s lower than the limit for purchases. So even if your card has a high credit limit, you won’t necessarily be able to access that much money for a cash advance. 

• No points or rewards: If your credit card company gives you points or rewards on purchases, it might not apply them to cash advances. 

Weighing these factors against your current financial situation can help determine if a credit card cash advance is the right choice. For example, you might be able to borrow money from friends or family, make an early withdrawal from a certificate of deposit (CD) if you have one, or get a line of credit from your bank. And if you can stand to wait for just a bit, you may find that the fees and interest rates on a personal loan are more advantageous than getting a cash advance on a credit card. 

How to get a cash advance on a credit card: a step-by-step guide

1. Check your credit card terms: Before you decide to get a cash advance, review your credit card agreement for the specific terms and conditions. Understand the applicable costs, cash advance limit, and any other rules. 

2. Consider the costs: Be aware of the interest rate and cash advance fee applicable to your card. Calculating these beforehand can prevent unpleasant surprises when you receive your statement.

3. Visit an ATM or bank: Visit an ATM that accepts credit cards for cash advances, enter your PIN, and follow the onscreen instructions to get cash. You may also be able to take your credit card to a local bank branch to request a cash advance in person. 

4. Plan for repayment: Because the money you get from a cash advance starts racking up interest immediately, make a plan for paying it back as soon as possible. Taking a moment to plan now can help reduce the impact on your finances down the road. 

Tips for managing cash advances responsibly

Cash advances may be a helpful financial tool when emergencies arise, but they can also put a strain on your overall financial picture, making it harder to get out of debt and even damaging your credit score if you can’t keep up with repayment. If you decide to get a cash advance on your credit card, follow these tips to manage it responsibly:

• Use cash advances only when necessary: Only use cash advances for essential, urgent expenses. Understand the difference between needs vs. wants and be sure you’re not taking on debt unless it’s really necessary. 

• Repay cash advances ASAP: While you can’t avoid paying interest on a cash advance, you can reduce the amount you accrue by paying it back as quickly as possible. Consider reducing your discretionary spending and putting the money you save toward paying down your credit card balance. 

• Avoid getting multiple cash advances: Taking out multiple cash advances can quickly lead to mounting debt. Stick to one advance at a time, ensuring it's repaid before considering another.

• Make a plan to get out of debt: The longer you’re in debt, the more money you spend on interest payments, which can impact your ability to cover necessary expenses and save up. Adopt a long-term plan to pay off credit card debt; if you have multiple cards and/or loans, consider the snowball method or the avalanche method.

• Start building an emergency fund: Getting a cash advance on a credit card can be one way to deal with a financial emergency. But if you have an emergency fund stored in a savings account, you’ll be better able to handle unexpected expenses without going into debt. Even saving a very small amount each month can add up to a healthy safety net over time.    

Real-life scenarios for using a credit card cash advance

Let’s look at a couple examples of how someone might get a cash advance on a credit card and manage their money to reduce the potential downsides. 

Example #1: Sarah owns a small letterpress printing business. One of her printing presses broke, and she needed to replace it right away to keep up with orders and avoid losing business. She found someone nearby who was selling a second-hand printing press, and needed cash to pay the seller. So Sarah got a cash advance on her credit card so she could buy the equipment and get back in business that same day. Then, she devoted most of her profits for the rest of the month to paying back the cash advance to reduce the amount of interest she had to pay.  

Example #2: Ty was in a car accident that left them with a broken leg. They had to miss work for a week while recovering, leaving them with reduced income for the month—along with a hefty hospital bill and car repair to deal with. At the end of the month, Ty didn’t have enough in the bank to cover rent, and they didn’t have an emergency fund to fall back on. Ty took out a credit card cash advance to pay rent for the month. To pay it back as quickly as possible, Ty reduced expenses by canceling streaming services and cutting out impulse buying; they also made a weekly budget to keep a close eye on their money management. 

How to get a cash advance on a credit card: consider your needs and make a plan for the future

When you find yourself looking for money in a hurry, a cash advance may seem like an expedient solution. But it comes at a cost: high interest, fees, and the potential to become mounting debt that’s hard to pay off. So before you ask “How do I get a cash advance on my credit card?” ask whether you really need to—and if you can afford the consequences in the future. In an emergency, a credit card cash advance could provide necessary relief. But cash purchases you don’t really need aren’t likely to be worth the downsides. 

Think through all the implications of a cash advance. Before you step up to the ATM, understand exactly how much it will cost you, including the fees and interest rate. If you decide a cash advance is the right choice for you, make a plan for how you’ll pay it back, including ways to save money so you can divert funds toward debt repayment. 

Finally, consider seeing this as an opportunity to start building your financial literacy and money management skills. Make a budget that prioritizes paying off debt and building an emergency fund so that you can not only repay that credit card cash advance, but also be more prepared to handle financial curve-balls that come up in the future. The more you develop your personal finance knowledge, the more empowered you’ll be to make informed decisions.