You may have heard of a credit card cash advance as a way to get money by borrowing against your available credit. It can be a convenient way to get cash quickly, and useful in an emergency, but there are some significant drawbacks to consider.
How does a credit card cash advance work?
To get a credit card cash advance, you need to (of course) have a credit card that offers cash advances—not all of them do. And your account must qualify for cash advances; various factors, including outstanding balances and credit ratings, can limit your ability to get a cash advance from your card issuer.
There are three common ways you might access a cash advance, which one you’ll use depends on your credit card company.
- ATM: Some credit card issuers will provide a PIN that you can use with your credit card, to get cash out the same way you would with an ATM card.
- Bank: In some cases, you’ll get your credit card cash advance by going into your bank with your card and asking the teller to assist you with a cash advance.
- Check: Some credit card companies will send you paper checks. When you receive them, you can write a check to yourself and deposit it at your bank or cash it.
The costs can be high
The main thing to remember about credit card cash advances is that while they’re a convenient way to get cash quickly, you pay a lot for that convenience. They can get you out of trouble, but the reality is that borrowing this way can also get you into trouble very quickly.
You’ll want to pay close attention to the cash advance fee (some cards charge one, others do not), and most importantly, the annual percentage rate—it’s going to be very high. It’s a good idea to calculate when you plan to pay off the advance, and how much interest you’ll be paying in that timeframe, so you know exactly what the overall cost of your cash advance will be.
Credit cards that offer cash advances, and their rates
Here are a few of the most popular credit cards that offer cash advances, what type of credit you need to qualify, and what their fees and rates are.
DCU Visa® Platinum Secured Credit Card
- Credit to qualify: Bad
- Annual Fee: none
- Cash Advance Fee: 0%
- Cash Advance APR: 16.50% (variable)
- Cost of a $100 cash advance: $16.50
PenFed Pathfinder® Rewards Visa Signature® Card
- Credit to qualify: Good
- Annual Fee: $95
- Cash Advance Fee: $0
- Cash Advance APR: 17.99%
- Cost of a $100 cash advance: $17.99
- Credit to qualify: Good
- Annual Fee: $95
- Cash Advance Fee: 3% of amount or $3 (whichever is greater)
- Cash Advance APR: 30.49%
- Cost of a $100 cash advance: $33.49
Star One Visa Signature Rewards Card
- Credit to qualify: Excellent
- Annual Fee: none
- Cash Advance Fee: $0
- Cash Advance APR: 8.75%
- Cost of a $100 cash advance: $8.75
All credit cards that offer cash advances charge for them, the interest rates are high, and there are often other fees, too. If you really need to do it, you can minimize your costs by paying the balance off right away. (But often, people who are seeking credit card cash advances aren’t in a position to pay the balance off immediately.) It’s generally best to treat credit card cash advances as a last resort, and consider other options first.
What are the alternatives to credit card cash advances?
Personal loan
A personal loan is a longer-term loan option that generally has lower interest rates (averaging around 10%) than a credit card cash advance, though qualifying and the interest rates you’ll pay will depend on your credit score.
Another key difference between a credit card cash advance and a personal loan is the amount of money you can borrow. Generally, personal loans are designed for borrowing much higher amounts—up to $40,000 or $50,000—while credit card cash advances are usually limited to 30% to 40% of your available credit limit.
Special/promotional rates (if your credit card issuer offers them)
Some credit card companies offer promotions that are basically an installment loan drawn against your available credit. The amount you can advance, and the interest rate you’ll pay will depend on your credit score, but it’s generally going to be a considerably better rate than a credit card cash advance.
The potential drawbacks of this type of borrowing is that even though the interest rates are better than credit card cash advances, it still could end up costing you quite a lot in fees and interest. You should also consider how the amount you’re looking to borrow will impact your credit utilization—because it will increase your amount of debt, it could have a negative impact on your credit score. It’s also important to note that these promos aren’t available to everyone, so it may not be an option for you.
Cash advance app
Cash advance apps can be an ideal solution when you need cash fast. They work by allowing you to borrow against your next paycheck, and the process to get set up and ready to borrow is usually simple and allows you to get your cash quickly.
Cash advance apps typically allow you to access smaller amounts of cash than credit card cash advances, but they are a much safer option for a couple of reasons.
- First, borrowing smaller amounts is less risky, as it will be easier to pay back than a large amount.
- Second, cash advance apps are designed for very short-term loans and often repay themselves via autopay on your next payday. This means there’s generally no impact to your credit utilization, and the smaller amount and quick repayment will keep you from getting into credit trouble.
A top cash advance app that makes it easy and fast to get some extra cash ahead of payday is Brigit. With Brigit’s Instant Cash you can get up to $250* in minutes. There are no late fees or interest to worry about, and the Brigit app also provides helpful budgeting, credit building, earning, and saving tools to support you in building healthy financial habits and strong credit.
*Subject to Brigit’s approval and policies. Not all members are approved for advances and the amount varies per customer. Advances range from $50 – $250. Log into the Brigit app to learn more. No credit checks or interest, ever. Additional fees may apply for instant delivery of funds.
