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What Is “Cash Advance” on Credit Cards and How Does It Work?

A cash advance is a withdrawal of cash from your credit card’s credit line — if allowed. Typically, a cash advance can be executed:

  1. At an ATM, if your credit card has a PIN or can be assigned one.
  2. With checks from your credit card issuer that can be deposited into your bank account. Such checks are also referred to as “convenience checks.”
  3. By going in person at a bank and telling them you need a cash advance through your credit card.

The cash advance feature is different from the standard way credit cards are used to pay for purchases during checkout (online or in-store).

If Cash Can Be Withdrawn With Cash Advances on Credit Cards, What’s the Catch?

The biggest catch with cash advances is the almost unsurmountable level of interest and fees. Many credit cards already have an APR in double-digits — which in itself can be hard to get out of — a cash advance APR can often overtake those numbers easily. To put things into perspective, NerdWallet cites an average APR of 14.51% for all accounts as of November 2021. With that information in mind, we can easily decipher that a cash advance APR will be much higher.

cash advance APRs are very high - much more than regular purchase APRs
A real-world example of a very high Cash Advance APR.

If you want to think about cash advances more simplistically, a concise explanation is that they are loans at exorbitant interest rates.

How Much Money Can I Take Out With a Cash Advance?

Ultimately, the amount of money drawn out as a cash advance will depend on the credit card company. Traditionally, a cash advance limit is almost always lower than the actual credit limit.

For context, The Ascent, a Motley Fool service, says that a cash advance limit can be about 20% – 50% of the total credit limit; however, it can be much less.

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The Way Credit Card Cash Advances Work

The way credit card cash advances work is quite capitalistic in nature. If one were to break down the process as a short summary, it goes as follows:

  1. Borrow cash in the form of a cash advance — in all likelihood against your credit line. As discussed, this can be achieved via:
    • Convenience checks
    • ATM withdrawals
    • In-person bank visits
  2. Pay back the borrowed money at extremely crazy-high interest rates.

Unless faced with severe dire circumstances, a credit card cash advance should be avoided at all costs — literally. In fact, you might be better of with alternatives such as borrowing money from friends or family, personal loans, or jumping onto a “new” credit card offer that hopefully comes with 0% APR for a good chunk of time, such as six months or one year. Plus, if you’re able to negotiate with a customer service person on the phone, you can get other benefits attuned to your financial needs — in addition to 0% promotional APR.