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Need cash, but only have your credit card?
Normally when you use your credit card to make a purchase, you charge the cost to your line of credit and then pay for your purchases in a statement later. But did you know you can also use your credit card to access cash?
“When you use your credit card to get cash instead of buying something, that’s a cash advance,” says Neal Frankle, a certified financial planner and the creator of CreditPilgrim.com. You can make the transaction at a bank or ATM, or by cashing checks provided by your credit card company at your local bank.
But this transaction comes at a cost. On top of repaying the cash you borrowed, you’ll likely pay a high APR on the balance. Before you use your card to get cash, know what the fees look like and understand the alternatives.
- How much does a cash advance fee cost?
- Cash advance costs for popular cards
- When a cash advance makes sense — and when it doesn’t
- How to avoid getting hit with a cash advance fee
How much does a cash advance fee cost?
Credit cards often come with different fees, APRs and terms. It’s critical to read the fine print on the specific card you hold or want to open.
For cash advances, most companies charge a flat fee or percentage of the transaction — whichever is greater. Some banks will vary the amount based on how you access the cash.
But the fee isn’t the only cost associated with cash advances. You’ll pay interest on the transaction, too. This is different than the interest on normal balances because it starts accruing immediately without a grace period.
Here are a few examples of credit cards and how they charge for cash advances.
Cash advance costs for popular cards
|Credit card||Cash advance fee||APR on cash advances|
|Chase Sapphire Preferred® Card||5% (minimum $10)||24.99% (variable)|
|Capital One Venture Rewards Credit Card||3% of the amount of the cash advance, but not less than $10||25.49% (Variable)|
|Discover it® Cash Back||5% (minimum $10)||26.49% (variable)|
Before you apply for a credit card, check out its fees, rates and terms, as they may change based on the Prime Rate. Banks and financial institutions that issue credit cards include copies of the card agreement alongside online applications, so review that document first.
For cards you already own, look at your billing statement or credit card agreement. You should find the same disclosures there. If you have further questions, call your credit card company and speak with a representative.
When a cash advance makes sense — and when it doesn’t
A cash advance can help you get the funds you need to cover an emergency expense that you can’t charge to your credit card.
“The only pro of a cash advance is that it provides fast access to cash,” Frankle says. “The downsides include the upfront fee plus the high interest rate you’ll pay on that advance if you can’t repay it right away.”
A cash advance can get you out of a tight financial spot if there are no alternatives, but it’s best to plan ahead to avoid taking one. The high total cost tends to outweigh any benefit.
How to avoid getting hit with a cash advance fee
Want fast access to cash without the fees? Smaller institutions may provide solutions.
Consider getting a card from a credit union. They may offer card options that don’t charge a fee for making cash advances.
“The best way to avoid a cash advance fee is to simply not take out a cash advance from a credit card company,” adds Frankle.
He suggests asking if the person or company you need to pay will accept the credit card itself as a form of payment or not making the purchase at all if it’s an option.
If you need the cash, look to other sources first. You may need to reduce another line item in your budget for this month to free up cash flow or tap into your emergency fund to cover an unexpected cost.
Or, if you’re looking for a back-up plan, try carrying a small amount of cash for emergency situations. That way you’ll have cash if you need it and will avoid any fees to get it.