How Credit Card Cash Advance Work?

Did you know that credit cash advances are very tempting? At times, you may be in a pinch and really need to cover your utility bills, have enough money to spend for the week, or pay for emergency repairs for your broken air conditioning system.

Sure, cash advances may feel like an easy and reliable solution to your current financial woes. However, they are an inexpensive Band-Aid solution that is likely to snowball into more financial challenges in the future. Most people don’t understand this simple concept, perhaps because they have no access to reliable information or credit counseling about credit card advances. Here are reasons why credit card cash advances should be your last resort option and what you can do to address your financial issues instead of turning to cash advances.

What Is a Credit Card Cash Advance?

A credit card cash advance is simply a cash loan from your credit card provider. Essentially, you will be withdrawing cash from your credit card account. Cash advances come in different forms of withdrawing money at an ATM using somewhat ‘convenient checks’ that usually come with your credit card. You can also use cash advances for other transactions, such as using your credit card to finance wire transfers and money orders.

Why You Should Avoid Cash Advances

Cash advances are usually tied to your credit card. However, they come with an entirely different set of terms, which vary between credit card providers compared to when you choose to swipe for your purchases. While the convenience of cash advances is an added advantage, here are the reasons you should not turn to credit card cash advances:

Expensive Fees

Using cash advances means incurring steep fees, which are calculated according to the size of your transaction and how much you intend to withdraw from your account. Fees range from a flat fixed rate of $5 to $10 or a percentage of the total amount you intend to borrow and vary from 1% to as high as 7% or 8%. If you’re planning to withdraw from your credit card via an ATM, be ready to face the extra ATM charges.

High Interest Rates

In addition to the fees you incur per transaction, there are also steep interest rates attached to cash advances. These interest rates are higher than the rates you pay for regular purchases using your credit card. That means your cash advance will show up on your credit card report or statement, along with other transactions in your monthly credit card statement, but the interest amount will start accruing immediately.

No Grace Period

A credit card is a convenient tool to finance your monthly expenditure while enjoying the possible cashback or reward points. However, this option is worthwhile if you pay off your credit card balances in full monthly. Recurring purchases on your credit card usually come with a grace period (21 days) after your last statement date. The bad news is that this perk does not extend to credit card cash advances.

No Perks

If you use your credit card and pay the balances in full on time, you are likely to enjoy many perks such as purchase protection, cash back incentive, reward points, and extended warranties. Credit card cash advances are perceived as some kind of a loan that doesn’t come with benefits.


Credit card providers usually distinguish cash advances from your regular purchases. With that comes a different set of terms and conditions regarding the minimum payments, the specific amount of money you can withdraw from your current credit card limit, and how these payments will be applied to credit card cash advances.

What To Do Instead of Using Cash Advances

Consider reading the terms and conditions carefully just to be sure of the interest rates, the number of fees, how payment works, and possible penalties associated with using your current credit card for cash advance services. Here are other options you can explore instead of using credit card advances.

Determine If You Really Need the Money

The moment you know how much it will cost you to use credit card cash advance services, determine whether you really need that money. Find out if you can do without it or if a smaller amount will be helpful. Check your budget and let it guide you to determine whether you need cash advances and how you will manage the payment if you take such a loan.

A Private Loan from Family or Close Friends

If your grandparents, parents, and other close relatives or friends can lend you money, that’s a great alternative to cash advances. You can work with them to draw up a loan and solid repayment plan. This will free you up from the steep fees and interest rates associated with the cash advances.

Withdraw from Your Assets

Suppose you own a property and have savings in your retirement savings plan or tax-free savings account. In that case, it would be wise to take equity out of such assets to free up the cash you need. Consult with an experienced financial advisor before you make this choice. This is because some of these financial choices might lead to taxes and penalties.

Ask for a Bank Loan, Consolidation Loan, Line of Credit, or Credit Card Limit Increase

If you have an excellent credit rating and a positive relation with your current financial institution or creditors, it is possible to request a personal loan from your bank. You can also ask for an increase in your current credit card limit. These are some of the options that could get you more cash in the meantime. Besides, these sources of cash are associated with a lower interest rate than cash advance rates.

Emergency Savings Fund

Suppose you have an emergency savings account. This would be the best time to withdraw some money from it. If you are in dire straits financially, one of the ways to bail yourself out is to withdraw some money from your emergency savings fund. Be sure to replenish it once you regain control of your finances.

We are here to Get Help With Your Debts

If you are thinking that you must use a credit card cash advance to finance what you will need, that may be the warning sign you need to heed because you should be seeking help with your money and debts. Contact York Credit Services and seek debt management advice. An experienced finance and debt management expert will give you reliable guidance on how to address your current financial difficulties. We can do that one on one, or by phone, whichever you prefer.