How to Make a Cash Advance on a Credit Card
Navigate the ins and outs of obtaining a credit card cash advance, from procedural steps to understanding the associated financial implications.
A credit card cash advance provides a way to access immediate funds by borrowing against your credit card’s available credit limit. This financial transaction is distinct from using your credit card for everyday purchases. While it offers quick access to cash, understanding its mechanics and associated costs is important before considering this option.
Defining Credit Card Cash Advances
A credit card cash advance functions as a short-term loan, allowing you to withdraw cash directly from your credit card’s available credit limit. Unlike a typical credit card purchase, a cash advance provides physical currency. This transaction draws from your established credit line.
A fundamental distinction from regular credit card purchases is the immediate accrual of interest on a cash advance. Standard purchases often come with a grace period, allowing you to avoid interest if the balance is paid in full by the due date. For cash advances, interest begins accumulating from the transaction date, meaning there is no interest-free period.
Credit card issuers typically impose a separate limit for cash advances, which is usually lower than your overall credit limit. For instance, a card with a $5,000 total credit limit might only allow a $1,000 cash advance. This sub-limit means you cannot access your entire credit line through a cash advance.
Steps to Get a Cash Advance
Obtaining a cash advance typically involves a few common methods. The most frequent approach is using an Automated Teller Machine (ATM). To do this, insert your credit card into the ATM and input your Personal Identification Number (PIN). Then, select the option for a cash withdrawal, ensuring you choose “credit” rather than “debit” if prompted, and specify the amount you wish to withdraw.
If you do not have a PIN or cannot recall it, you may request one through your card issuer’s online account portal or by contacting customer service. After confirming the transaction, the ATM will dispense the cash, and the amount, along with any applicable fees, will be added to your credit card balance.
Another method for obtaining a cash advance is by visiting a bank teller. You will need to present your credit card along with a valid government-issued identification. Inform the teller you wish to perform a cash advance and state the desired amount. The teller will process the request, providing you with the cash and a receipt for the transaction.
Credit card issuers may also provide “convenience checks” linked to your account. These blank checks allow you to draw funds from your available credit limit without using your physical card. You can write a convenience check to yourself and cash it at a bank, or deposit it into your bank account, similar to a personal check. The amount of the convenience check is deducted from your credit line and is treated as a cash advance.
Understanding Cash Advance Fees and Interest
A primary cost of a credit card cash advance is the cash advance fee, an upfront charge applied directly to the transaction. This fee is typically calculated as a percentage of the amount advanced, often ranging from 3% to 5%, or a flat minimum fee, whichever is greater.
In addition to the fee, cash advances are subject to their own interest rate, known as the cash advance Annual Percentage Rate (APR). This APR is almost always higher than the interest rate applied to regular credit card purchases.
A significant financial implication of cash advances is the immediate accrual of interest. Unlike purchases that often have a grace period, interest on a cash advance starts accumulating from the transaction date. This means that even if you pay off the advance quickly, you will still incur interest charges for the period the money was borrowed. The interest is typically calculated daily based on your outstanding balance.