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What Is a Credit Card Cash Advance?
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(image: https://s-media-cache-ak0.pinimg.com/236x/c0/92/4a/c0924a59e58f81d784010942777de64b.jpg)What Is a Credit Card Cash Advance?
Cash advances are short-term cash loan -- an expensive one -that is secured against the credit line on your card.
By Lindsay Konsko
Updated on Aug 9, 2021
Edited by Paul Soucy Lead Assigning Editor Credit scoring, credit cards Personal finance Paul Soucy has led the Credit Cards content team at NerdWallet since 2015. He was an editor with USA Today, The Des Moines Register and the Meredith/Better Homes and Gardens family of magazines for over 20 years. He also established a profitable freelance editing and writing practice with a focus on business and personal finance. He was editor of the USA Today Weekly International Edition for six years and won the most prestigious distinction of the year from ACES: The Society for Editing. He has a bachelor's degree in journalism, as well as a Master of Business Administration. He lives in Des Moines, Iowa, with his fiancée, his two sons and a dog named Sam.
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Cash advances allow you to use your credit card to get a short-term cash loan at a branch of a bank or ATM. As opposed to a cash withdrawal from your bank account, a cash advance has to be repaid -- exactly like any other loan that you can make on the credit card. Consider it as making use of your credit card in order for "buy" cash, not goods or services.
It's convenient, but it's quite expensive.
Do you need money quickly? Consider:
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What is the process of a cash advance?
If you only carry credit cards to pay for everyday expenses You could be in a pinch when confronted with a cash-only purchase, such as buying lunch from a street vendor or a variety of vegetables at a farmers market or a sandwich at an deli owned by mom and pop. In that case the cash advance option could seem appealing. Some people also turn to credit card cash advances when they require cash but don't have enough in their bank account.
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If your credit card is equipped with a PIN, you can obtain cash advances right from an ATM. If not, you can bring your credit card to a bank which offers advances via your card's payment network like Mastercard as well as Visa. You'll need to present your ID.
Be aware that a majority of credit card companies won't allow you to use your entire credit line in form of a cash advance. For most people, cash advances can be limited to just a few hundred dollars. This means that you can't rely on your credit card to supply you with many dollars in the situation of an emergency.
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The reason cash advances are costly
The process of getting a cash advance straightforward, yet it's one of the most expensive methods to receive some cash. This is due to the fact that cash advances are subject to a variety of expenses:
Cash advance charges. They are charged by the card issuer. Some cards charge a flat fee per cash advance, for example, $5 or $10. Other cards charge a percentage of what's that is withdrawn, often up to 5percent. There are times when it's a percentage based on a minimum dollar amount -like the equivalent of 3% or $10, whichever is greater.
ATM or bank fees. These fees are imposed by the financial institution that handles the transaction -the person who owns the ATM or the bank where you can get the advance.
Interest. This can be costly in two ways. The first is that the rate of interest that a credit card charges on cash advances is usually significantly higher than the rates that is charged for purchases. The second reason is that interest on cash advances typically begin taking effect in a matter of minutes. This isn't something you earn with purchase.
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Given the costs associated with taking a cash advance, you may be in financial trouble If you're thinking about one since there aren't enough funds on the bank account. Cash advances should be used only in the case of extreme emergency. If you find yourself using them regularly then it's the time to alter your approach or seek assistance, for instance via a specialist or a.
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Alternatives to cash advances
If you find yourself having a cash shortage and you're not sure of where to turn, take a look at the following options. They're not all ideal however, they may end up costing less than cash advances in the end:
The personal loan. It can be costly even if your credit score isn't the best, but the interest charges and terms are superior to an advance in cash. ( )
Offers from your credit card's issuer. In recent years, several options have been offered, which include the ability to convert your existing credit into the form of an installment loan without requiring a new loan application. There will be interest charges for this feature, but potentially at a moderate rate.
Borrowing money from family or friends. It might be uncomfortable however the savings will be worth it.
Overdrawing your checking account. Instead of cash advances at an ATM, consider overdrawing your checking account with your debit card. You'll be charged a fee however, you don't have to be concerned about paying interest.
In summary the short version, taking out a cash advance on your credit card is you are taking on a costly short-term loan. This is rarely an ideal choice, so consider all other options before using a cash advance.
What's next?
About the writer: Lindsay Konsko is a former staff writer who covered credit cards and consumer credit for NerdWallet.
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