Cash Advance Fees: What They Cost and How To Avoid Them

A cash advance fee is a charge your credit card issuer applies when you use your card to withdraw cash or complete certain cash-equivalent transactions. The fee often ranges from 3% to 5% of the amount withdrawn, and interest usually starts accruing immediately.

Here's how cash advances work, what they mean for your wallet and whether it's truly a good option.

Key Takeaways

• A cash advance fee is charged when you use your credit card to withdraw cash. It typically runs 3% to 5% of the amount, with a minimum of around $10.

• Interest kicks in immediately — there is no grace period. Cash advance annual percentage rates (APRs) tend to cost more than what you pay on regular purchases.

• Costs can stack up fast. ATM fees, foreign transaction fees and high interest can all pile on at the same time.

• There are less expensive ways to get cash in a pinch. Personal loans and savings may be lower-cost options worth trying first.

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What Is a Cash Advance Fee?

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

This fee can kick in automatically each time you do the following:

• Withdraw money from an ATM using your credit card

• Visit a bank teller for a cash advance

• Make certain cash-equivalent purchases — such as buying money orders, casino chips or cryptocurrency

How Much Do Cash Advance Fees Cost?

Typically, a cash advance fee is 3% to 5% of the amount you withdraw or a minimum of $10, whichever is greater. Here's a quick breakdown of the most common charges to watch for.

Consider this 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 — that's 5% of $500. 

Cash advance fees can also stack on top of other costs and interest charges, including:

• Higher interest rates: Cash advances typically have higher annual percentage rates (APRs) than regular purchases, and interest can begin accruing immediately.

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

• ATM fees: When withdrawing from an out-of-network ATM, you may face two separate charges: your credit card issuer's cash advance fee and a fee from the ATM operator, which typically ranges from $2 to $5 per transaction.

Is a Cash Advance Ever Worth It?

A cash advance may make sense during a true emergency, but it's usually one of the more expensive ways to borrow money. Because interest often starts accruing immediately and fees can stack up quickly, cash advances can become costly if you can't repay them fast.

Before using a credit card cash advance, it's worth comparing other options that may offer lower costs, more flexible repayment terms or fewer fees.

Better Alternatives to Cash Advances

Consider these more cost-effective alternatives instead:

• Personal loans: A personal loan from a bank or credit union may offer lower interest rates than credit card cash advances, depending on the lender and your credit. 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. A balance transfer credit card with 0% APR can help pay off existing debt, though there may be balance transfer fees. This may help pay down existing debt without interest during that promotional period while avoiding a cash advance.

• 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 three to six 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.

Final Take

Cash advances on credit cards can offer quick access to cash, but they don’t come cheap. Find out what interest and fees a cash advance carries before using one. Explore your other options first and have a solid plan to pay it back — it'll save you stress and money later on.

FAQ

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?

You can avoid cash advance fees by not using your credit card for cash withdrawals or cash-equivalent transactions. Instead, use alternatives such as debit cards, personal loans or maintaining an emergency fund for unexpected expenses.

Do cash advances accrue interest daily?

Yes, cash advances start accruing interest immediately, and the interest is calculated at a daily rate from the time you take the advance. There's no grace period like the one available for regular credit card purchases.

Key Terms

• Cash advance fee: A charge applied by your credit card issuer each time you use your card to withdraw cash or complete a cash-equivalent transaction. Fees typically range from 3% to 5% of the amount withdrawn, with a minimum charge of around $10.

• Cash advance APR: The interest rate applied to cash advances, which is usually higher than the rate charged on regular purchases. Unlike purchases, interest begins accruing immediately with no grace period.

• Grace period: The window of time after a billing cycle ends during which you can pay your balance without incurring interest. Cash advances do not qualify for a grace period, meaning interest starts the moment the transaction occurs.

• Emergency fund: A savings reserve typically covering three to six months of living expenses. Having one reduces the need to rely on high-cost options like cash advances when unexpected expenses arise.

Sources

• Consumer Financial Protection Bureau (CFPB). An essential guide to building an emergency fund.

• CFPB. Data Spotlight: Credit card cash advance fees spike after legalization of sports gambling.

• CFPB. What is a grace period for a credit card?

Summary generated by AI, verified by MoneyLion editors