What is a cash advance on a credit card?
A cash advance allows you to withdraw cash using your credit card, like using a debit card to take money from a cash machine. However, unlike regular purchases made with your credit card, cash advances come with higher fees and interest rates, making them a potentially expensive way to access cash.
You might be surprised to learn that certain other credit card transactions are usually considered cash advances as well, such as:
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purchasing foreign currency
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purchasing gift vouchers
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gambling of any kind, including lottery tickets
If you've got a credit card with a low introductory rate or a 0% rate card, you'll still get charged the card provider's standard rate of interest for cash advances.
How does a cash advance work?
When you take a cash advance, the amount you withdraw is added to your credit card balance. There may be a cash advance limit, which could be lower than your credit limit.
You can get a cash advance from a number of places including:
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An ATM machine
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In a branch
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Through cashback
Interest starts accruing immediately, and there’s no grace period like you have with regular credit card purchases. Because of these costs, cash advances are generally best used only in emergencies or as a last resort.
How much does it cost to take cash out on a credit card?
Taking out cash with a credit card is usually more expensive than using it for purchases. Additional fees and charges vary depending on your provider, but usually include:
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High fees: Most credit cards charge a cash advance fee. This varies depending on your provider but is typically around 3% of the amount you withdraw, or a flat fee with a minimum charge of around £3.
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Higher interest rates: Cash advances often come with a higher interest rate than regular purchases. As an example, your card’s standard interest rate may be 15%, but its cash advance rate could be 25% or more.
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No grace period: When you make a purchase with your credit card, you usually have a grace period (usually up to 56 days) before interest starts to accrue. But with cash advances, interest starts accruing immediately.
Does taking cash out with a credit card affect my credit score?
Using your credit card for a cash advance won't directly affect your credit score. However, if withdrawing cash pushes your credit utilisation ratio above the recommended level of around 30%, it could impact your score.
Also, cash advances get recorded on your credit file, so if there's multiple cash advances on your file, it could indicate that you’re struggling financially. This may affect your ability to get approved for credit in the future.
Can I withdraw cash on a credit card without paying fees?
No, you cannot withdraw cash on a credit card without paying fees. You could consider these alternatives:
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Debit card: If you have the funds, use a debit card to withdraw cash. There are no interest charges, and fees are usually lower.
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Personal loan: A personal loan might offer a lower interest rate and more manageable repayment terms. However, there are fees that may apply, which can vary between lenders.
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Ask for help: If you're in a financial bind, consider reaching out to friends or family for short-term support.
If you need to access debt advice, you can do so for free from any if the following:
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Disclaimer: All information and links are correct at the time of publishing.
Fiona Peake
Personal Finance Writer
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
