The High Cost of a Credit Card Cash Advance

Obtaining a cash advance is as simple as using your bank account debit card. Credit lenders participate in the major ATM networks which allow consumers to get cash from their credit card any time they want as long as they have the spending limit available on the account.

The Advantages

The ability to obtain cash quickly is valuable for consumers. Even today, there are times when cash is necessary to meet an emergency or to buy an item from someone who does not accept credit cards.

If you know you will be quickly able to repay a cash advance on your credit card, these cash out transactions are not a problem. There is a transaction fee for each cash advance made but the fee may be justified for the convenience of available cash.

There are so many negative comments posted about cash advances you may not realize there are times when such an advance can save money, too.

If you find a great buy at an auction or estate sale, using a credit card or personal check may not be an option for payment. Obtaining a cash advance can enable you to take advantage of an unexpected great deal.

Perhaps the test of whether a cash advance is warranted is that it is for a special purpose and that you have the resources to quickly repay that advance.

The Dangers

A cash advance is expensive if you do not have the ability to pay it back quickly. If you are taking a cash advance to cover daily or living expenses it is a sign of poor financial management.

There may be times when cash flow isn? working in your budget and you need to obtain cash to pay a bill or buy basic items until cash flow improves. This scenario can happen to anyone and as long as you understand the risks a cash advance may be a good option to pursue.

However, the highest interest rates are in the area of cash advances. The APR is often close to 30% for taking cash from your credit line. Consumers who have credit difficulties can often trace the beginning of their problems to cash advances they were unable to quickly repay.

Real Costs and Fees

Your credit card may have an APR of 18-23% but that APR will not apply to cash advances. If you pull $200 from your credit line in cash the APR on that transaction will be almost 30%.

In addition, you will be assessed a transaction fee that may be a flat rate of $10 or may be a percentage of the cash taken out of the account.

A consumer who makes multiple cash advances is often considered to be a higher credit risk. Thus, any advance taken must be carefully considered and be used for a specific purpose.

Obtaining a cash advance for a night on the town or to have extra spending money is a high risk financial transaction.

The greatest danger is to those who have lost income through unemployment or other crisis and are using cash advances from their credit cards to pay for necessities. Too often, the result is an increased debt load where the APR is significantly higher and monthly payments greatly increased.

How to Obtain?

When you receive a new credit card, you are advised of the cash advance limits on the account. Most lenders provide a percentage of the spending limit of the account that can be used for cash advances. In addition, you are given a four digit PIN number that can be used at designated ATM locations.

Using an approved ATM system, you use the card just as you would your bank ATM card. You enter the amount you wish to withdraw and the PIN number. The cash is provided immediately and that amount plus the transaction fee is added to the balance on your credit card.


The cash advance can be a valuable tool in the event of an emergency or when you find a special sale where cash is the only form of payment accepted by the seller.

Cash advances should be used with extreme caution and taken only when you know you have the ability to quickly repay the amount disbursed.

Frequent cash advances for impulse buys can quickly lead you into financial difficult and the cost of a cash advance repaid over time are excessively high. I also highly recommend you to read our guide on cash back credit cards and how to profit from them!