Compare Credit | Should I ever get a cash advance on my credit card?
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Should I ever get a cash advance on my credit card?

From bill collectors to farmers market vendors, it seems like just about everyone accepts credit cards today. That’s why cold, hard cash can feel almost foreign. But occasionally you may need (or just want) a stack of bills in your wallet, and if you don’t have the money in your bank account at the moment, a credit card cash advance may seem like the perfect solution. After all, you’re borrowing the money one way or another — why not spend it in cash form?

The truth is, there’s a big difference between swiping your card for a $200 purchase and taking out a $200 cash advance from your credit card. Here’s what you need to know before using your credit card to access cash.

How a credit card cash advance works

A cash advance allows you to withdraw cash against your credit card limit. You can either do it at a bank, at an ATM using your PIN number, or by using a convenience check provided by your credit card issuer. The amount of cash you can borrow will vary based on the terms and conditions of your card. Once you’ve got the cash, you can spend it however you want.

How much a cash advance will really cost you

If you haven’t reviewed your credit card’s terms and conditions, you may not even realize that a cash advance will actually cost you more than the money you’re withdrawing. These are the fees you can expect:

  1. Cash advance fee — The amount will vary based on your card, but most charge between 2-8% of your withdrawal. So if you take out $1,000 in cash and your card charges an 8% cash advance fee, you now owe $1,080.
  2. Increased interest rates — Most credit cards charge higher interest rates on cash advances than for typical purchases. Again, the terms will vary based on your card, but the average interest rate for a cash advance is 24%. Even worse, your interest charges are likely to kick in immediately because most cash advances do not come with a grace period.
  3. ATM fees — If you withdraw your cash advance from an ATM, you may also be charged a transaction fee.

When does a credit card cash advance make sense?

While a credit card cash advance can be a convenient way to access cash in a pinch, it’s an expensive way to borrow money, and should be ideally reserved for emergency situations. If you do have to take out a cash advance, try to pay off your balance as soon as possible in order to avoid paying high interest fees and negatively impacting your credit score.