A cash advance is basically a short-term loan offered by your credit card issuer. When you apply for a cash advance, you are borrowing money against your card's line of credit. A cash advance allows you to use your credit card to get a short-term cash loan at a bank or ATM. Unlike a cash withdrawal from a bank account, a cash advance must be returned just like anything else you put on your credit card.
Think of it like using your credit card to buy cash instead of goods or services. To get a cash advance at an ATM, your physical card is required, as well as a personal identification number (PIN) provided by the card issuer. You may also be subject to daily ATM withdrawal limits and fees similar to those imposed on checking accounts. When you're limited, you might consider a cash advance on your credit card.
A cash advance is a way to access money without applying for a formal loan. Cash advances do not require a credit check and can provide funds immediately. The amount of fees and interest you pay is directly related to the duration of your repayment, so cash advances are intended to be a very short-term solution. They also limit the maximum amount of cash you can access, so a cash advance may not be enough to cover large expenses.
A cash advance can still make sense compared to other ways to get a quick loan, such as a payday loan, which must be repaid, usually before your next paycheck. Before using your credit card for an advance, it's helpful to know what steps you can take to minimize the costs of a cash advance. If you can't pay more than the minimum, it may be better to save your money and avoid receiving a cash advance. However, there are costs for taking a credit card cash advance and, in some cases, limits on the amount you can withdraw.
In short, requesting a cash advance on your credit card means applying for a very expensive short-term loan. This will be expensive if your credit isn't good, but interest charges and terms will still be more favorable than a cash advance. You can access a cash advance at an ATM, the financial institution for your card, or by writing a convenience check. Without a grace period, interest on your cash advance begins to accrue the same day you receive your funds.
You may only be able to borrow up to your card's cash advance limit, which will vary by issuer. In other words, if you need more than a few hundred dollars to deal with an emergency, a cash advance may not be a reliable option. Credit card cash advances allow you to access your line of credit for cash when you need it, but it's important to understand the costs of a cash advance and know how credit card cash advances work before you apply for one. 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.
Instead of requesting a cash advance at an ATM, consider overdrawing your checking account with your debit card. If there are bills that you normally pay in cash or using an ACH transfer from your checking account, consider putting them on your credit card. Merchant cash advances are usually not extended by your credit card provider, but are offered in partnership with the payment processor for credit and debit card sales. .
