Is Getting A Credit Card Cash Advance A Good Idea?

Written by Banks Editorial Team
4 min. read
Written by Banks Editorial Team
4 min. read

Expenses keep coming, and some people need extra cash to cover short-term emergencies. People in this scenario will borrow money to pay expenses and then repay the loan. Unfortunately, some people who borrow money for innocent expenses find themselves in a mountain of debt due to high-interest rates and not paying off the debt on time. Payday loans and car title loans are notorious for high-interest rates, making consumers seek alternatives. A credit card cash advance is one alternative you may have considered. We will discuss how much credit card cash advances cost and whether you should use them or get funds elsewhere.

Get a Digital Credit Card
Access a revolving line of credit based on your cash flow, not your credit score, with the Grain digital credit card.

How Does a Credit Card Cash Advance Work?

A credit card cash advance provides you with additional funds. Credit cardholders can borrow against their credit limits and repay the debt over time. You can either get cash from your credit card at an ATM or your bank’s local branch, assuming the branch supports credit card cash advances. Banks will ask for your ID before giving you a cash advance. You won’t have to show your ID at an ATM, but your credit card must have a PIN.

Credit card issuers will not let you borrow cash against your entire limit. In addition, most credit card cash advances are only a few hundred dollars. That’s enough money to cover some emergency expenses, but if you have medical bills or are planning a vacation, a credit card cash advance isn’t the best funding source.

Do Cash Advances Hurt Your Credit?

Cash advances immediately increase your credit utilization ratio, and a higher ratio will hurt your credit score. Credit utilization measures the percentage of your untapped credit limit. For example, if you have borrowed $1,000 against a $5,000 credit limit, you have a 20% credit utilization ratio. A credit utilization ratio below 30% will help your score, with credit utilization under 10% yielding the best credit gains. 

Paying the cash advance late can also hurt your credit score and result in more interest. Most credit cards include 21-day grace periods where you don’t accrue interest on the cash advance. After this grace period, interest accumulates and makes it more difficult to stay on top of your financial obligations. Cash advances won’t hurt your score if you quickly pay them off, but if you let them linger, they can hurt your score and lead to bad money habits.

What Are the Fees on Credit Card Cash Advances?

Credit card companies charge several fees for cash advances. These fees can quickly add up if you frequently use credit card cash advances.

  • Cash advance fee: This fee is either a percentage of the total cash advance or a dollar amount, such as $10. Some issuers charge a cash advance fee based on whether the minimum dollar amount or percentage of the cash advance is higher.
  • ATM/bank fees: The ATM or local branch you use to obtain the funds may have additional fees. These costs vary, but you should keep them in mind if you plan to use credit card cash advances.
  • Interest: Financial institutions set double-digit interest rates on credit card debt. You can avoid interest by repaying the cash advance within the grace period, but this expense can rapidly add up if you do not sort it out right away.
Get a Digital Credit Card
Access a revolving line of credit based on your cash flow, not your credit score, with the Grain digital credit card.

Things to Consider Before Requesting Credit Card Cash Advances

Credit card cash advances will provide you with additional funds, but getting extra money isn’t always a good thing. So you should consider these factors before reaching out to your credit card issuer or bank for a cash advance.

Use Only When Necessary

A credit card cash advance has additional fees and will increase your debt. If you have to request a cash advance, you should do so sparingly. Requesting numerous cash advances will result in more debt and fees, and all of these requests can cultivate bad money habits. You should only request credit card cash advances during emergencies. If the purchase can wait, save for it instead of tapping into your credit line.

Understand Credit Terms and Conditions

Credit cards lay out their interest rates, fees, and other important details in the terms and conditions. Reviewing these details before asking for a credit card cash advance will reveal how much that request will cost. Likewise, you can review the terms and conditions and check if competitors have lower fees and interest rates. This step is useful even if you do not need a cash advance right now. It’s better to know the terms upfront than get surprised when you need the cash.

Monitor Your Available Credit Limit

Your credit limit reveals how much funds you can borrow between credit card purchases and cash advances. Most companies will not let you take out a cash advance that matches your remaining credit limit, but borrowing a few hundred dollars will get you closer to the maximum. Increasing your debt will also raise your credit utilization ratio, which isn’t favorable for your credit score. Monitoring your credit limit will keep the debt front and center as you repay it. You will also discover how much you can safely borrow based on your credit card balance and interest rates.

Pay It Off as Soon as You Can

Paying the credit card cash advance early gets you out-of-interest payments. Of course, you won’t escape the cash advance or ATM fees, but interest payments can silently destroy your wealth. Paying off a credit card cash advance as quickly as possible enforces robust money habits and will make you less reliant on cash advances in the future.

Alternatives to Credit Card Cash Advances

Credit card cash advances aren’t as bad as payday loans, but you should assess other options. These cash advances have fees and interest, which can add up. Therefore, you should consider alternatives such as the ones listed below.

Friends and Family

Friends and family may bail you out and help you cover emergency expenses. Most friends and family members won’t charge interest, and some won’t request that you repay them. However, you should pay back friends and family out of principle. Asking people close to you for money can minimize costs, but you can damage relationships by breaking promises.

Personal Loans

Personal loans are typically more affordable than credit card cash advances. A higher credit score will help you secure a higher loan maximum and lower interest rates.

Salary Advances

Some employers let their workers tap into future earnings to cover immediate expenses. You can receive next week’s wages today instead of waiting the entire week. This strategy can help you cover emergency expenses without tapping into your credit limit, but your wages will take a hit on future paydays until the salary advance is covered.

Digital Credit Line

You don’t need a credit card to get a credit line for good spending. Digital credit lines offer more flexibility and allow you to use other metrics to establish and borrow against a credit limit. The Grain financial app syncs with your debit card and provides a line of credit up to $1,000 based on your cash flow. You can access a digital credit line and access all of the features by downloading the Grain app today.

Get a Digital Credit Card
Access a revolving line of credit based on your cash flow, not your credit score, with the Grain digital credit card.

Disclaimer: Credit offer based on cash flow in the linked checking account and may require a credit check. All accounts are subject to ID verification and approval. See your Credit Agreement and Terms of Service for further details.

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