Understanding the ins and outs of a cash advance on a credit card
Understanding credit card cash advances
A credit card cash advance is a withdrawal of cash from your credit card account. Essentially, you're borrowing against your credit card. However, there are costs to taking a credit card cash advance and, in some cases, limits on certain cash advances. Here's what you need to know before you choose to make a cash advance with your credit card.
When to consider using a cash advance
Cash advances can be an important source of funds in an emergency or a way to help you avoid overdraft fees. Here are a few other instances when you might want to take out a credit card cash advance.
- You need to pay by cash or debit and you don’t have enough money in your checking account
- Your short-term expenses are higher than usual because of an emergency or unplanned purchases
- Your paycheck is late or smaller than usual
Factors to consider before using a credit card cash advance
One thing to keep in mind when considering a credit card advance is that they often have higher APRs than purchases made with your credit card. They also typically have transaction fees. So before making a withdrawal, it’s a good idea to consult your credit card agreement to make sure you know any rules and fees.
- Transaction fee: You will pay a transaction fee for credit card cash advances
- APR: The APR for cash advances is often higher than for credit card purchases
- Interest-free period: Cash advances often begin accruing interest at the time of the withdrawal, meaning there’s no grace period
How to avoid taking a cash advance
- Make purchases with your credit card. If you have the option, you can often limit interest and transaction fees by charging purchases to your card rather than getting a cash advance.
- Avoid unnecessary purchases. Ask yourself if the purchase you intend to make with your cash advance is worth the extra fees or if it can wait.
- Check your balance. Don’t use a cash advance as a buffer just because you’re unsure how much money you have in your bank account. Use Mobile BankingFootnote1 to check your balance and monitor when bills are deducted.
- Create a budget. A budget will help you compare your income to your costs so you know how much you can save to cover unexpected expenses in the future.
- Build an emergency fund. Occasionally you’ll need to pay for things that aren’t in your monthly budget, such as car repairs. Build an emergency fund when things are going well and you may be able to avoid having to use credit card cash advances for these transactions.
For more information about bank cash advances and direct deposit and check cash advances, refer to your credit card agreement or your credit card statement. You can also contact your credit card company for more information.