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What is a credit Card Cash Advance?
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What is a Credit Card Cash Advance?
A cash advance is a short-term cash loan -- an expensive one -that is secured against the credit line on your card.
By Lindsay Konsko
Updated August 9, 2021
Editor: Paul Soucy Lead Assigning Editor Credit scoring, credit cards, personal finance Paul Soucy has led the Credit Cards content team at NerdWallet since the year 2015. He worked as an editor at USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for more than 20 years. He also established a profitable freelance editing and writing business that focuses on personal and business finances. He was editor of the USA Today Weekly International Edition for six years, and was awarded the top honor from ACES: The Society for Editing. He holds a bachelor's in journalism, as well as a Master of Business Administration. He lives in Des Moines, Iowa, with his fiancee, his two sons, as well as an animal named Sam.
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Cash advances permit you to utilize your credit card for an instant cash loan from a bank ATM. Unlike a cash withdrawal from a bank account, a cash advance is required to be paid back -- exactly like any other loan that you can make on your credit card. Imagine the use of credit cards in order to "buy" cash, not goods or services.
It's convenient, but it's quite expensive.
Do you need money quickly? Consider:
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How does a cash advance work?
If you use only credit cards to pay for everyday expenses You could be in a pinch when faced with a cash-only situation like buying lunch at a street vendor or a variety of vegetables at a farmers market or lunch at a mom-and-pop deli. If that happens the cash advance option could seem appealing. Some people also turn to credit card cash advances when they require cash but do not have enough money in the bank account.
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When your credit card comes with PINs, you are able to get cash advances directly through an ATM. In other cases, you can take your card to a financial institution that can provide advances through the card's payment processor, such as Mastercard as well as Visa. You'll need to present your ID.
Be aware that most credit card companies don't permit you to withdraw your entire credit line in the form of an advance. Most people's cash advances are capped at just a couple hundred dollars. This means that you can't rely on your credit card to provide you with very large amounts of cash in the event of an emergency.
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The reasons why cash advances can be expensive
Cash advances are easy, but it's one the costliest ways to get your hands on some cash. This is because cash advances come with various costs:
Cash advance fees. They are charged by the card issuer. Some cards charge a flat fee per cash advance, for example, $5 or $10. Others charge a percentage of what's that is withdrawn, often as much as 5%. It's sometimes a percentage with an amount that is minimum in dollars- such as 3% or $10, whichever is greater.
Bank or ATM fees. They are set through the institution handling the transaction -the operator of the ATM or the bank through which you receive the advance.
Interest. It can be expensive through two methods. First, the rate that credit cards charge on cash advances is usually much higher than the rate charged on purchases. The second reason is that interest on cash advances typically begin growing in a matter of minutes. There's no like you can get with purchase.
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Due to the high costs of getting a cash advance it is possible that you're in dire financial straits If you're thinking about one since you don't have enough money in the bank account. Cash advances should only be used only in extreme emergencies. If you find yourself relying on them It could be the right the time to alter your approach or seek assistance, for instance via a specialist or a.
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Cash advances are not the only option.
If you do find yourself in a financial bind and aren't sure where to go, you can look at the options below. There aren't any that's perfect however, they may result in a lower cost than a cash advance in the long run:
Personal loan. This can be costly when your credit isn't perfect however, the interest rates and terms will still be better than a cash advance. ( )
Offers from your credit card's issuer. Recently, there have been a number of features, such as the possibility to turn your available credit in to an installment loan without requiring a new loan application. You'll still be charged interest on this type of feature, but potentially at a reasonable cost.
The borrowing of money from friends or family. This might be awkward however the savings will be worth it.
Overdrawing your checking account. Instead of taking cash advances at an ATM think about overdrawing your checking account with your debit card. You'll be charged a fee, but you won't have to pay interest.
In summary the short version, taking out cash advances on your credit card means accepting a high-cost short-term loan. It's almost never a good idea, so consider all other alternatives before making the cash advance.
What's next?
About the writer: Lindsay Konsko is a former staff writer covering credit cards and consumer credit for NerdWallet.
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