Capital One cash advance: Is it a good idea?

Young man at ATM taking out a Capital One cash advance Image:

In a Nutshell

If you need money fast and you’re a Capital One cardholder, you may be able to get a Capital One cash advance, which is a short-term loan from your credit card. But cash advance interest and fees are expensive, so you might be better off with a different option.

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Capital One cash advances might be useful in a pinch, but there are probably cheaper ways to get access to cash.

If you need cash quickly — say to pay a housing deposit for a last-minute move or catch up on a bill that’s past-due — it can be incredibly stressful. In high-stress money situations, it’s tempting to look for the quickest solution. That’s why some people turn to credit card cash advances, which are essentially short-term loans from a credit card.

You can get a Capital One cash advance at ATMs or at bank locations displaying a Visa or Mastercard logo, withdrawing the cash in the same way you would with a debit card. But because credit card cash advances are short-term loans from your credit card company, they involve fees and accrue interest.

The process of getting a cash advance might be simple, but the fees are often hefty and can add up quickly. So you may want to consider other options if you need cash.

Let’s take a look at the ins and outs of a Capital One cash advance.


How to get a Capital One cash advance

The process of getting a Capital One cash advance is straightforward, and you can get as many cash advances as you need as long as you stay within your available cash advance limit.

1. Know your limit. The first step is to make sure that you know your cash advance limit, which is different from (and usually less than) your credit limit. You can find it through your most recent credit card statement, labeled as “Available Credit for Cash Advances.”

2. Find your PIN. If you plan to get the cash advance from an ATM, you’ll need your personal identification number. The PIN is specific to your Capital One credit card. If you’re not sure what it is or you need to reset it, log in to your account online and reset it via “More Account Settings,” or call 1-800-227-4825.

If you don’t have a PIN, you can still get a cash advance from a physical bank, as long as it displays a Visa or Mastercard logo, but you’ll need a government-issued ID, like a driver’s license, and your Capital One credit card.

3. Choose your ATM. You can get a cash advance from an ATM. In other words, you don’t need to visit a Capital One ATM to get a cash advance. But it’s important to note that there might be extra ATM fees involved.

4. Get the cash advance. Once you get to the ATM, insert your credit card and enter your PIN. Then select the option for cash advance and choose an amount within your available cash advance credit limit. Keep in mind that the ATM could have other limits on what you can withdraw.

Fees and other potential pitfalls

Like most loans, cash advances accrue interest and come with extra fees. Even though credit card purchases may have fees and accrue interest as well, it works a little differently for cash advances thanks to their loan-like nature.

Fees

For almost all Capital One credit cards, you’ll pay a cash advance fee of either $10 or 3% of the amount of the cash advance (whichever one is greater).

Here’s how that would work. Say you get a cash advance of $100. You’d pay a $10 fee, since $10 is greater is than 3% of the total amount (which would be $3). Now imagine that you got a $500 cash advance instead. You’d pay a cash advance fee of $15, which is 3% of $500.

Depending on the amount of your cash advance, the fees can be costly.

Cash advance APR

The APR for cash advances is often higher than the APR for purchases. For Capital One credit cards, the variable APR for purchases ranges from around 14.24% to 28.24%. But the variable APR for cash advances starts out much higher, with the range between 23.74% and 28.24%. Plus, Capital One begins charging interest on the date of the cash advance transaction. This means there’s no grace period. Instead, your cash advance begins to accrue interest immediately, which can really add up over time and make a cash advance an expensive “short-term loan” option.

Consider these alternatives to cash advances

Cash advances aren’t your only option if you need quick cash. In fact, you might be able to save money on fees and interest if you use your credit card to make the necessary purchase instead of for an advance. But if that’s not possible, here are some other choices to consider.

Personal loan

Even though Capital One doesn’t offer personal loans, there are lots of other lenders to choose from offering terms that might be more favorable than the terms of a cash advance. But it’s important to note that personal loans are not instant — it takes time to apply, get approval and receive the money — and a personal loan may still come with high interest rates, depending on the lender, the state of your credit and other factors.

Borrow from friends and family

If you’re facing an emergency and need cash, your friends and family might be able to help. Even if it isn’t your first choice, it’s probably a cheaper option, so it’s worth considering. But before borrowing from a friend or family member, think through all of the possible consequences.

Keep reading: What to know about family loans

Bottom line

If you’re in a true emergency, a cash advance might be a useful solution. But it’s important to crunch the numbers and make sure that the short-term solution of a cash advance isn’t going to cause long-term stress. But if the situation isn’t really an emergency, it’s better to wait until you can save up the cash in your checking account to avoid the debt altogether.