Cash advances and regular credit card purchases are treated differently and can have different effects on your monthly payments and interest rates. Many credit card companies will code certain purchases as a cash advance if they consider the purchase to be a cash equivalent transaction. This means that you are buying something that works like cash. Most credit cards allow you to borrow a fixed amount of cash as an advance that you pay with interest.
In general, you can only borrow up to your card's cash advance limit and not your total credit limit. For the cash advance limit, check your credit card statement or contact the company A credit card cash advance is essentially a short-term loan that is given through your credit card, and there are several ways to get it. The only difference in the ATM is that you will select the cash advance option instead of choosing your savings or checking account. Your credit card's cash advance limit will normally be lower than the credit limit, with a typical limit ranging from 20% to 50% of your total spending limit.
Beyond the possibility of incurring too much debt and damaging your credit, you should try to avoid receiving a cash advance due to high interest rates and fees. The APR for credit card cash advances tends to be substantially higher than the APR for regular purchases. People who request cash advances are more likely to fail to pay their credit card debt than people who don't. And you'll pay interest on your cash advance even if you pay it in full and you had a zero balance for that billing cycle.
This example highlights the importance of paying more than the minimum amount to minimize the cost of a cash advance. You can use Bankrate's credit card calculator to see the total cost of a cash advance and see how different payment strategies can change the amount you'll have to pay. It can be easy to request a cash advance of your credit limit, but you should avoid doing so unless it's an extreme emergency and you're sure you can repay the money as soon as possible. Depending on your credit profile and the type of loan you get, a personal loan may be less expensive than getting a cash advance on your credit card.
In addition, cash advances usually don't qualify for rewards, cash back programs, or any other credit card benefits. In fact, the APR for a credit card cash advance can easily be between 5% and 10% higher than the normal purchase rate. Using your credit card to withdraw cash from an ATM, using one of the convenience checks provided by the card issuer, and using your credit card overdraft protection are all ways in which your credit card issuer makes cash available to you. In a sense, a cash advance acts like any other purchase made through your credit card, but instead of buying goods or services, you buy cash.
In reality, credit card cash advances are loans and, as such, are expensive and can easily lead to credit card debt.
