Cash Advance Fees: What to Know Before Borrowing

Ever needed some quick cash and thought, “I’ll just grab some cash from my credit card — easy-peasy.” That quick solution could come with some sneaky costs. 

Cash advance fees can significantly impact your wallet, whether you’re using a credit card at an ATM or borrowing from a cash advance lender. 

Let’s break it down: how cash advance fees work, what they mean for your wallet, and if it’s truly a good option.

Table of contents

• What is a cash advance fee?

• How much is a cash advance fee?

• Cash advance terms and fees to familiarize yourself with

• Is a cash advance a good idea?

What is a cash advance fee?

A cash advance fee is a charge that credit card companies apply whenever you use your credit card to get cash or make cash-equivalent transactions. Think of it as a service fee for borrowing cash against your credit limit. 

Every time you withdraw money from an ATM using your credit card, visit a bank teller for a cash advance, or make certain cash-like purchases (such as buying money orders, casino chips, or cryptocurrency), this fee kicks in automatically.

How much is a cash advance fee?

Most cash advance fee structures are generally straightforward: credit card issuers typically charge a percentage of the amount withdrawn, usually 3% to 5% or a minimum charge of $10 – whichever is greater. 

💡Example: If your card has a 5% cash advance fee with a $10 minimum, withdrawing $100 would cost you $10 (the minimum fee applies since 5% of $100 would only be $5). If you took out $500, you’d pay $25 (5% of $500). 

Additional credit card cash advance fees

Alongside asking “what is the fee for a cash advance?” you’ll also have to be mindful that cash advance fees are in addition to other possible fees and interest charges you may incur, some of the most common include:

• Higher interest rates: Interest charge on cash advances are typically much steeper APR than regular purchases, which can start accumulating immediately.

• Foreign transactions: If you take a cash advance while abroad, you may also incur foreign transaction fees of 1-3% on top of all other charges.

• ATM fees: When withdrawing from an out-of-network ATM, you’ll likely face two separate charges – one from your credit card issuer and another from the ATM operator, typically $2-5 each.

Cash advance terms and fees to familiarize yourself with

Understanding the costs and conditions tied to credit card cash advances is crucial before borrowing. These terms outline what you’ll encounter and how they impact your bottom line.

Interest charges: Cash advance interest charges feature much higher APR than regular purchases, and interest starts accumulating immediately with no grace period.

Credit limits: Your cash advance limit is separate and lower than your regular credit limit, usually restricted to 20-30% of your total credit line, with daily withdrawal caps.

Payment structure: Credit card companies typically apply your monthly payments to lower-interest balances first, which may make it harder to pay off your high-interest cash advance balance.

Rewards and benefits: Cash advances are excluded from reward programs and sign-up bonus requirements, and standard card benefits don’t apply to these transactions.

👉 How Much Tip is Expected From Paycheck Advance Apps?

Is a cash advance a good idea?

A cash advance from your credit card is rarely the best financial choice due to its high credit card cash advance fees and immediate interest charges. Consider these more cost-effective alternatives instead:

Earned wage access: One solid option is to explore Instacash^® from MoneyLion. MoneyLion’s Instacash advances up to $500 of your earned wages with no interest charges or credit checks – choose between fast delivery in minutes for a fee or free transfers within 1-5 business days.

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Personal loans: A personal loan from a bank or credit union typically offers much lower interest rates than credit card cash advances. You’ll get a fixed repayment schedule and predictable monthly payments, making it easier to budget and plan your repayment.

0% APR balance transfer cards: If you need money to pay off existing debt, consider applying for a credit card with a 0% APR introductory offer on balance transfers. This can give you several months to pay off your balance without accruing any interest charges.

Emergency fund: Building an emergency fund is the best long-term solution for unexpected expenses. Start by setting aside a small amount each month until you have 3-6 months of living expenses saved. While this won’t help with immediate cash needs, it’s the most financially sound way to handle future emergencies.

Don’t Settle for High Credit Card Cash Advance fees

Cash advances on credit cards MIGHT save the day, but they don’t come cheap. Know what you’re getting into. Take a minute to understand credit card cash withdrawal charges, explore your other options, and have a solid plan to pay it back — it’ll save you stress (and money) later.

FAQs

Why am I being charged a cash advance fee?

You’re being charged a cash advance fee because you’ve either withdrawn cash using your credit card or made a transaction that your credit card company categorizes as a cash advance.

Can you avoid cash advance fees?

Cash advance fees can be completely avoided by not using your credit card for cash withdrawals or cash-equivalent transactions, and instead using alternatives like debit cards, personal loans, or maintaining an emergency fund for unexpected expenses.

Are cash advances charged daily interest?

Yes, cash advances start accruing interest immediately at a daily rate from the moment you take the advance, with no grace period like regular credit card purchases.