What It Means
A cash advance is when you use your credit card to withdraw cash from an ATM or get cash-equivalent transactions like money orders. Cash advances are one of the most expensive ways to borrow money. They typically carry a higher APR than regular purchases (often 25-30%), charge an upfront fee (usually 3-5% of the amount), and have no grace period - interest begins accruing immediately. Cash advances also do not earn rewards. Financial experts generally advise against cash advances except in true emergencies, as the costs can quickly spiral.
Frequently Asked Questions
Why are cash advances so expensive?
Cash advances carry higher APRs, immediate interest accrual (no grace period), and upfront fees because they represent higher risk to the issuer and are essentially short-term unsecured loans.
Does a cash advance affect your credit score?
Not directly, but it increases your credit utilization and the high interest can lead to growing balances, both of which can hurt your score.