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For a steep price, cash advances are a quick way to get cash from your credit card when you need it. They have high interest rates, fees, and other costs that make them much more expensive than regular credit card purchases. It’s very expensive to get a cash advance. Here’s why and how you can keep the costs down if you need to.
High Interest Rates
The sky-high interest rate is the main reason why cash advances are so expensive. Cash advance APRs are almost always much higher than the regular purchase APR on the same card.
For example, your regular purchase APR may be around 18%. But your cash advance APR could be 25%, 30%, or even higher. Creditcards.com found the average cash advance APR across popular cards is over 25%.
This means that interest charges on cash advance balances add up very quickly. If the APR was 30%, the daily interest on a $1,000 cash advance would be $0. 82 per day.
The interest starts accruing immediately when you take out the cash advance, with no grace period. Compare this to regular purchases, where you get a grace period of at least 21 days before interest kicks in as long as you pay your bill on time each month.
So cash advance interest can really add up, especially if you don’t pay off the balance quickly. A high cash advance APR magnifies the amount you end up paying back.
Transaction Fees
In addition to high interest, cash advances also come with transaction fees. There is usually either a flat transaction fee or a percentage fee on each cash advance, typically around 3-5%.
For example, there may be a $10 flat fee or a 5% fee. On a $300 cash advance, a 5% transaction fee would be $15.
Some cards have both – a minimum flat fee and a percentage fee. These fees add to your balance immediately when you take out the advance.
No Grace Period
Regular purchases made with a credit card don’t charge interest for a certain amount of time as long as you pay your bill on time every month. But that grace period does not apply to cash advances.
Interest starts accruing on cash advances right away. Your credit card company will start charging you interest on the cash advance from the day you take it out.
This policy further increases the total interest costs, since there is no interest-free grace period at all on cash advances.
Daily Limits
Credit card companies usually place limits on the total cash you can withdraw in a day, both for security and to limit their own risk exposure. The daily cash advance limit is typically a few hundred dollars.
So you may not even be able to get as much cash as you need in one day if you bump up against your card’s limit. This restriction can create problems if you were counting on a large cash advance to cover an emergency expense.
Higher Risk for Lenders
From the lender’s perspective, cash advances are riskier than regular credit card transactions. With a regular purchase, the lender gets payment from the merchant you bought from.
But with a cash advance, the lender has to front you the money without a direct product or service being purchased. There is more risk the cash advance balance won’t be repaid.
Lenders offset that risk by charging higher interest rates and fees on cash advances. The additional costs also serve to limit cash advance usage to emergency situations rather than everyday transactions.
How Banks Apply Payments
Before 2009, if your payment exceeded the minimum amount due, credit card companies would apply the excess amount to balances with the lowest APRs first. This minimized their own interest costs.
So higher APR balances like cash advances stuck around longer. Now, the 2009 CARD Act requires excess payments to be applied to highest rate balances first. This cardholder protection reduces the total interest you pay.
Faster Accumulation of Interest
Compared to regular purchases, interest on cash advances builds up more rapidly for several reasons:
- The APR is higher
- There is no grace period
- Transaction fees get added immediately
This faster interest accumulation results in greater costs for the borrower. You end up paying back far more than the amount of cash you initially received.
Fewer Consumer Protections
Cash advances don’t offer the same consumer protections as credit cards for regular transactions. Protections like:
- The ability to dispute fraudulent or incorrect charges
- The right to withhold payment for unsatisfactory goods or services
- The option to reverse payment if needed
So if you report an unauthorized cash advance transaction, it can be more difficult to get it removed from your account or receive credit for the funds.
How to Minimize Cash Advance Costs
While cash advances are very expensive, they can be a useful source of emergency funds if used carefully. Here are some tips to limit the costs:
- Take out only as much cash as absolutely necessary
- Have a plan to pay off the balance quickly
- Pay well over the minimum payment each month
- Compare cash advance rates between cards to find the lowest
The faster you can repay the balance, the less time interest has to accumulate and drive up the total repayment cost. Avoid cash advances unless absolutely needed, but follow these tips to reduce the expense if you must take one.
Alternatives to High-Cost Cash Advances
Because cash advances are so costly, you should consider other options whenever possible:
- Ask for an extension or due date change from creditors
- Borrow from family or friends
- Take out a lower-interest personal loan
- Transfer balances to a 0% APR card
While not always ideal, these alternatives can sometimes meet your short-term cash needs at a lower overall cost than an expensive credit card cash advance.
The Bottom Line
Cash advances allow fast access to credit card cash, but come with very high interest rates, transaction fees, and other costs. There is no grace period, so interest starts accruing immediately. These factors combine to make cash advances an extremely expensive way to borrow money. But in an emergency, they can be an option of last resort if used prudently. Take out minimal amounts, repay quickly, and search for lower-cost alternatives to avoid racking up excessive interest fees on cash advances.
Borrow as little as possible
Ideally, to minimize cash advance costs you should consider borrowing only the absolute minimum you need. The smaller your cash advance amount, the less you’ll have to pay in fees and interest. Remember, a cash advance is simply a loan from a bank. The best way to limit costs is to avoid taking out a considerable amount, if possible.
How much can a cash advance cost?
You can use Bankrate’s credit card calculator to see the total cost of a cash advance, as well as how different repayment strategies can change how much you’ll have to pay.
Let’s say you take out a $500 cash advance at 30 percent APR and make a minimum payment of $17.50 each month. You’d pay that amount for 67 months (more than five years!) before the balance was paid in full. You would also pay $510.95 in interest, plus a $25 cash advance fee (5 percent) and possibly an ATM fee, likely $3 or more. So, in order to borrow $500, you would end up paying an additional $538.95.
That means the convenience of a cash advance would cost you more than the original borrowed amount of $500 if you only pay the minimum payment. Doubling your monthly payment to $35 would have you paying off your debt in 18 months with $126.31 in total interest (about 25 percent more than the amount borrowed), while tripling it to $52.50 a month would take just 12 months and you’d only pay an additional $78.18 in interest (about 16 percent more).
This example highlights the importance of paying more than the minimum amount in order to minimize the cost of a cash advance. You can significantly reduce interest charges and your repayment timeline if you can make sizable payments over the minimum amount. If you are unable to pay more than the minimum, it may be best to save your money and avoid getting a cash advance.
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FAQ
Why are cash advances expensive?
Lenders consider cash advances riskier than regular purchases, so they charge higher interest rates and transaction fees to offset this risk. Jun 9, 2025.
How do I avoid cash advance fees?
To avoid cash advance fees, prioritize minimizing your reliance on them and exploring alternative funding options. Avoid taking out multiple cash advances, withdraw only what you need, and consider using a credit card with no cash advance fees.
How much is a cash advance fee for $1000?
The fee for a $1,000 cash advance is around $40, based on the current average cash advance fee. Credit card companies typically charge a 3% to 5% fee every time you take out a cash advance, except if you are using a 0% cash advance fee card like the PenFed Platinum Rewards Visa Signature® Card.
Do cash advances hurt your credit score?
Cash advances don’t hurt your credit score directly, but they can hurt it indirectly if you don’t handle them properly.