At some point in your life, you may be in a financial situation where cash is the only form of money accepted, but you don’t have enough in your checking account to cover the expense.
In some very rare cases, a cash advance from your credit card would be a suitable option.
Quick answer: Using a cash advance through your credit card, you can get cash to fund your bank account. However, it isn't recommended because of the fees and interest rates involved.
A cash advance might be necessary when you are in an emergency situation, like if your car broke down on the way to the hospital, and you get in a taxi that only accepts cash.
Or if your rent is due and you’re a couple hundred dollars short, but your landlord only accepts cash.
Essentially, a cash advance is a short-term loan that you take out against your credit card.
There’s usually a limit to how much you can take out from your credit card account, but it varies on what type of card you have and what limit the bank set for you.
If you use a credit card regularly, you’re technically taking out a short-term loan in the form of credit every month and paying it back as you go.
But getting a cash advance is a much riskier financial move.
How to Get a Cash Advance Through a Credit Card
Cash advances aren’t difficult to obtain. You can get a cash advance by using a credit card at an ATM machine instead of a debit card.
Most credit cards have a limit of a couple hundred dollars per withdrawal on a cash advance and a total limit of a few thousand dollars.
Unlike taking money out of your checking account with a debit card, cash advances come with higher fees and high interest rates.
By using a debit card you may face ATM fees, but when you extract cash from your credit card you’ll have to pay an advance fee too.
A cash advance fee is usually between 2% and 5% of the amount you’re withdrawing.
For example, if you withdraw $300 with your credit card, you’ll be charged $9 if there’s a 3% fee just to get the cash. Some credit cards, like the Barclaycard Ring Mastercard, only charge a flat $3 fee for cash advances.
On top of the advance fee, you will have to pay interest as well. The interest starts from the day you withdraw cash from your credit card with no grace period.
Normally, the interest rate for cash advances is 1% to 7% higher than your credit card’s standard APR.
For example, if your credit card’s standard APR is 12%, you could pay up to 20% for cash advances. The interest on cash advances also varies depending on the cardholder’s credit.
To avoid falling deep into credit card debt from a single cash advance, it’s best to pay it back as soon as possible.
The Dangers of Cash Advances
Even though they’re convenient, the fees and brutal interest rates attached to cash advances don’t make them an attractive option, no matter how dire the financial situation.
They often leave the cardholder with debt that’s difficult to get out of because the interest rates that come with cash advances are so high.
That’s why it’s important to consider all other options before thinking about getting a cash advance.
For example, you could borrow money from a friend or family member. Or you could take out a personal loan, which is still a form of debt, but would overall be cheaper than a cash advance.
Of course, there’s always the option of trying to make some more money in the meantime by doing odd jobs or selling items or clothes from your home.
Another option is overdrawing your checking account if necessary, which comes with a steep fee, but it’s still lower than the fees and interest attached to cash advances.
And if you can cover the expense with a credit card, you can consider getting a card with 0% interest.
Lastly, consider if what you need the cash advance for is a true emergency. Could you live without that expense for awhile? Do you really need what you’re about to purchase with a cash advance?
If getting a cash advance is absolutely the only option you have, you have to be honest with yourself about your ability to pay it back as soon as possible, preferably within a month.
That’s the only way to avoid getting deeper into credit card debt that can be difficult to bounce back from, which poses a threat to your credit score.
Cash Advances Are a Last Resort
In a bind, cash advances are convenient because you only need a credit card and a nearby ATM machine.
However, they put credit card holders at high risk of credit card debt because of the fees and high interest rates.
And, there are other debt-friendly options, like getting a personal loan.
When in a true emergency, a cash advance should be the last resort after you’ve exhausted all other options. The debt and burden of paying it back just aren't worth it.