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What is a credit card cash advance?

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If you’re ever in a situation where you need to access cash quickly, a cash advance can help. Say your car breaks down and you’ve taken it to a mechanic who only accepts cash, a cash advance can let you take out cash from your credit card or line of credit at a bank or ATM.

While this may seem like an appealing option, it’s important to understand all the consequences and fine print of relying on a cash advance. Cash advances aren’t treated the same way as regular purchases on your credit card and can get expensive quickly.

What is a cash advance on a credit card?

A credit card cash advance is a short-term loan, where you withdraw cash from your credit card account. However, unlike regular purchases on your credit card, you pay a cash advance fee as well as a higher interest rate than your annual percentage rate (APR) for regular purchases. With a cash advance, you also aren’t granted an interest-free grace period.

What is the cost of a cash advance?

Cash advances come with several additional fees, which aren’t associated with regular credit card purchases.

  • Cash advance fee: when you take money out, you’re charged a cash advance fee, which is essentially a service charge. This fee can be a flat fee (usually about $5 in Canada or up to $7.50 abroad) or a percentage of the cash advance.
  • ATM fee: if you take money out of an ATM as a cash advance, you will be subject to any ATM fees associated with the transaction in addition to the cash advance fee.
  • Higher APR: a cash advance APR is typically higher than that of regular credit card purchase —and can reach as high as 29.99%. Unlike normal purchases, cash advances don’t have an interest-free grace period and start to accrue interest immediately from the day of the transaction. And if you only make the minimum payment on your credit card, your lower interest balances may be paid off before your high-interest balances, resulting in higher monthly interest payments for a while. Details about payment allocation is are included in your credit card agreement.

Should I use a cash advance on a credit card?

If you’re thinking about taking out a cash advance, there are a few questions you should ask yourself:

  • Can I access this money elsewhere? Cash advances really should be treated as a last resort. Credit card cash advances, in particular, can become expensive quickly, so you should consider getting cash elsewhere first.
  • Can I pay it back quickly? Since cash advances start to accrue interest from the day of the transaction, interest fees can start to accumulate quickly. If you decide to get a cash advance, you should try to pay it back as soon as possible.
  • How much money do I need to borrow? If you do need to take out a cash advance, only take out the amount of money that you absolutely need. If you need money for non-emergency situations, consider other lower interest means of getting a loan, such as a bank loan.

Benefits of a cash advance

The main benefit of a credit card cash advance is convenience.

If you’re really strapped for cash, you can withdraw cash from a bank or ATM right away. However, cash advances aren’t treated the same way as a regular credit card purchase and can become expensive quickly.

Drawbacks of a cash advance

While credit card cash advances can be a quick way to get cash, they come with several consequences that can make them an expensive option.

  • Higher interest rates: credit card cash advances typically have a higher interest rate than the APR for purchases.

  • No interest-free grace period: normal credit card purchases usually have a 21-day grace period before users need to pay back their credit card balance. However, with credit card cash advances, there is no grace period so you start to accrue interest immediately from the day of the transaction. 

  • Negative impact on your credit score: although credit card cash advances don’t directly impact your credit score, your credit could be affected if the balance on your credit card is increased to the point you’re using 35% of your available credit, or if you struggle to make your payments on time.

  • No rewards: unlike normal credit card purchases, credit card cash advances won’t count towards any of your credit card’s reward programs.

Alternatives to a cash advance

Credit card cash advances should be used as a last resort. Before taking out a cash advance, consider using the following to get more cash:

  • Use a debit card to get cash from your chequing or savings account.

  • Sign up for overdraft protection which allows you to withdraw extra money from your bank account without penalties or at a low-interest rate.

  • Use an emergency fund.

  • If you have good credit, apply for a personal loan at your financial institution as they tend to come with lower interest rates.

  • Get a prepaid credit card (e.g., KOHO, Stack Mastercard, Mogo Visa Platinum).

  • Borrow money from family or friends.

Best credit cards for cash advances

Not all credit cards charge additional interest for a cash advance compared to normal purchases. If you think you’ll need to use the credit card cash advance service frequently, consider choosing a credit card with a low cash advance APR, such as:

1. HBSC+ Rewards Mastercard: 11.99% APR on purchases and cash advances with a $25 annual fee.

Image of the HSBC +Rewards credit card

HSBC +Rewards™ Mastercard®

Rated 3.8/5 stars.

Our Review
  • 2pts Collect 2 points for every $1 spent on eligible dining and entertainment purchases.
  • 1pt Collect 1 point for every $1 spent on all other everyday purchases.

2. CIBC Select Visa: 13.99% APR on purchases and cash advances with a $29 annual fee.

CIBC Select Visa

CIBC Select Visa Card

Rated 3.6/5 stars.

Our Review

How to get a cash advance

You can get a credit card cash advance at your financial institution or at any ATM the same way you would make a withdrawal using your debit card. Additionally, if you’ve been given credit card cheques from your credit card company, you can also name yourself as the payee and deposit the cheque in your bank account.

Are cash advances worth it?

A cash advance should only be used as a last resort option. If you do need to use one, try to:

  • Take out only as much money as you absolutely need.
  • Pay the money back as quickly as possible to avoid steep interest rates.

Overall, be cautious. Cash advances can be a band-aid solution that can lead to more credit card debt if not paid off in a timely manner.

Frequently asked questions

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