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A cash advance lets you borrow cash against your credit card's available credit. And while it might sound convenient in a pinch, cash advances also come with specific costs worth understanding upfront: higher interest rates than regular purchases, immediate interest charges with no grace period, transaction fees, and potentially lower limits than your total credit line.
Understanding how cash advances work—and what they'll actually cost you—can help you make informed decisions when you need access to cash quickly.
How a Credit Card Cash Advance Works
Here's a quick step-by-step breakdown of how to get a cash advance on a credit card:
Check your cash advance limit. Your credit card statement will show a separate cash advance limit. This is usually a portion of your total credit line—often around 20–40%. If your card has a $5,000 credit limit, your cash advance limit might be $1,000 or $1,500.
Withdraw the cash. You can get a cash advance at an ATM using your credit card and PIN, request one from a bank teller, or use a convenience check mailed by your credit card issuer. Some card issuers also let you transfer cash to your bank account through their mobile app, though these transfers are typically treated as cash advances.
Fees and interest are posted immediately. Unlike regular purchases, cash advances come with fees and interest charges that hit your account right away—there's no grace period to pay off the balance before costs start adding up.
Getting a cash advance is straightforward, and understanding the costs upfront helps you plan accordingly.
The Costs of a Cash Advance: Fees and APR
Cash advances come with specific costs that are important to understand before you withdraw. Here's what you're paying for:
Cash advance fee: Most credit card companies charge either a flat fee (often $5-10) or a percentage of the amount withdrawn—typically 3-5%, whichever is greater.
Cash advance APR: The interest rate on cash advances is often higher than the rate on purchases. While your regular purchase APR might be 18%, your cash advance APR could be 25% or more. This rate applies immediately—there's no grace period.
How Charges are Applied
Credit card issuers separate cash advance balances from purchase balances on your statement, and how your payments are applied depends on whether you're paying the minimum or more. When you make only the minimum payment, that money typically goes toward your lower-APR purchase balance first, while your higher-APR cash advance balance continues accruing interest. But thanks to the CARD Act, any payment above the minimum must go to your highest-APR balance first—meaning extra payments will directly reduce your cash advance.
Of course, the most important thing is understanding the specifics of your card. You can always find the payment allocation details in your cardholder agreement—look for the section on how payments are applied when you have multiple balance types.
"Cash-Like" Transactions That Count as Cash Advances
Not all cash advances involve withdrawing money from an ATM. Certain transactions are treated as cash advances even if you're not getting physical cash. Common examples include:
Money orders and traveler's checks
Casino chips or gambling-related purchases
Lottery tickets
Some wire transfers or peer-to-peer payments, particularly those initiated through bill pay
Cryptocurrency purchases (depending on the issuer)
Foreign currency exchanges
These transactions are typically subject to cash advance fees and APRs, just like ATM withdrawals. In contrast, regular credit card purchases—like buying groceries or booking a flight—come with a grace period and are charged at your standard purchase APR. (And, debit card cash withdrawals are a completely different thing, as they pull directly from your bank account and don't involve borrowing money or interest charges.)
If you're unsure whether a transaction will count as a cash advance, check your cardholder agreement or contact your credit card issuer before completing the transaction. (Our Sunward representatives are also happy to help, and you can always give them a call.)
Credit Score & Cash Flow Impacts
Cash advances can affect your financial health beyond just the fees and interest in a few different ways, including:
Credit Utilization Spikes
Cash advances increase your credit utilization ratio—the percentage of your available credit that you're using. So if you have a $5,000 credit limit and take a $1,000 cash advance, the cash advance will count toward 20% of your utilization. This is important to keep in mind, since high utilization can lower your credit score, especially if you're carrying balances across multiple cards.
Higher Minimum Payments
Cash advances typically increase your minimum payment due, which can strain your monthly cash flow. If you're already tight on funds—which is often why people turn to cash advances in the first place—this can create a cycle that's hard to break. But it just means you have to be careful. Check what your new minimum payment will be before you withdraw, just to make sure it fits your budget. If possible, plan to pay more than the minimum to reduce the balance faster and minimize interest charges.
Compounding Costs
Because interest starts accruing immediately and payments are often applied to lower-APR balances first, cash advance debt can snowball quickly if you’re not careful. What starts as a $300 withdrawal can turn into a much larger financial burden over time. To minimize these costs, try to pay off your cash advance as quickly as possible—even making an extra payment shortly after the withdrawal can significantly reduce the total interest you'll pay. If you can, make a plan for repayment even before withdrawing
Compliance & Consumer Protections
Federal consumer protection laws—specifically Regulation Z under the Truth in Lending Act—require credit card issuers to clearly disclose cash advance terms in your cardholder agreement. These disclosures include:
The cash advance fee (either as a flat fee or a percentage)
The cash advance APR
The fact that cash advances typically begin accruing interest immediately, with no grace period
How payments are allocated across different balance types, particularly when you pay more than the minimum
You'll find this information in the fine print of your credit card agreement and in the Schumer Box—the standardized disclosure table that appears when you apply for a card. These disclosures are included in every cardholder agreement, typically in the fee schedule and terms section.
If you're ever unsure about how a transaction will be treated or what fees apply, you can (and should) ask your card issuer's customer service team to clarify before you proceed.
Smarter Alternatives to Cash Advances
Before you take a cash advance, it's worth exploring options that may offer lower costs and more flexible terms. Personal loans from credit unions or banks typically come with much lower APRs than cash advance rates and offer fixed repayment terms. Sunward, for example, offers Signature Loans that let members borrow without collateral, as well as savings-secured loans that use funds in a savings account as collateral—a good option if you're looking to build credit while accessing cash at a lower rate.
If you're a homeowner, a home equity line of credit (HELOC) can provide access to cash at significantly lower interest rates than credit cards, though it does use your home as collateral. For those facing specific bills or expenses, asking service providers or creditors about payment plans can often buy you time without any interest charges—whether it's a medical bill, utility payment, or other expense.
You might also consider temporarily adjusting your budget to free up cash or building a small emergency fund in a savings account to cover unexpected expenses without borrowing.
If you're unsure what the best course of action is for your situation, visiting a branch to discuss your options with a lending specialist can help you find a solution that fits your needs and goals.
Moving Forward with Confidence
Cash advances can provide quick access to cash when you need it—but they can also come with costs that add up quickly if you’re not prepared. The key is understanding those costs upfront and comparing cash advances with other borrowing options to ensure you make the smart decision, not just for right now, but for the long term.
FAQs
How does a credit card cash advance work?
A cash advance lets you borrow cash against your credit card’s available credit. You can withdraw money at an ATM, request a transfer, or complete certain “cash-like” transactions. Unlike regular purchases, interest on a cash advance starts accruing immediately, and fees are charged upfront.
Does a cash advance hurt your credit?
A cash advance doesn’t directly damage your credit score, but it can affect it indirectly. Taking a cash advance increases your credit utilization, and higher balances can lower your score—especially if you carry the balance for a while or miss payments.
Why am I being charged a cash advance fee?
Cash advance fees are charged because the transaction is treated as a higher-risk form of borrowing. Issuers typically charge either a flat fee or a percentage of the amount withdrawn, plus a higher interest rate that applies immediately.
How do you pay back a cash advance?
Cash advance balances are repaid through your regular credit card payments. Minimum payments may go toward lower-interest balances first, but any amount you pay above the minimum is applied to the highest-interest balance—often the cash advance—helping reduce costly interest faster.
What happens if you take a cash advance on a credit card?
You’ll receive cash quickly, but you’ll also start accruing interest immediately and pay fees upfront. If the balance isn’t paid off quickly, costs can add up and increase your minimum payments, which may strain your monthly cash flow.
When does a cash advance make sense?
In rare situations where you need cash immediately and have no lower-cost options, a cash advance may be a last resort. It’s usually best to explore alternatives—like personal loans or payment plans—that offer lower rates and more predictable repayment terms.
