How do credit card cash advances work?

What is a cash advance?

A cash advance on your credit card is a short-term cash loan at a bank or ATM. It is similar to withdrawing money from the ATM with your debit card, except the cash comes from your credit limit rather than your bank account balance meaning you have to pay interest. Your credit cash advance is tied to your credit card that requires a credit check to get approved and comes with the option of paying the amount over some time as long as you make minimum payments. Generally speaking, a cash advance acts like any other purchase made through your credit card, where you are buying cash instead of buying goods or services. 

How to get a credit card cash advance?

You can get a cash advance in the following ways:

• ATM

You can go to an ATM and get a cash advance if you have a PIN for your credit card. If you don’t have a PIN, you can request it. Remember, it may take a few business days to receive a PIN. Also, there are limits to withdrawing an amount from an ATM.  

• In-Person

You can visit your bank and request a cash advance with your credit card.

• Convenience check

Your credit card comes with convenience checks that can be used to write a check to yourself which can then be cashed or deposited.

Cons of getting a cash advance:

Getting a cash advance is easy but it’s one of the costliest ways to get your hands on some cash because of the following factors:

• Cash advance fees

Your card issuer may impose cash advance fees, which typically ranges from 3% to 5% of the total amount of each cash advance you request.

• ATM or bank fee

If you use an ATM or visit a bank, you can expect a 3% fee for taking out a cash advance.

• Cash advance APR

Cash advances generally carry a separate higher interest rate compared to that of purchases or balance transfers

• No grace period

Cash advances don’t have a grace period meaning you will be charged interest starting from the date you withdraw a cash advance. This is different from purchasing with your card as in this case, the issuer offers a grace period of at least 21 days where you won’t incur interest if your balance is paid in full by the due date.

How to pay off your cash advance? 

Your monthly payments may be split among balances, depending upon how much you pay if your card’s cash advances carry a different interest from purchases or balance transfers. If you make the only minimum payment, it will mostly be applied to a balance with a lower interest rate, and the payment amount above the minimum will be applied to the balance with the highest interest rate, which is likely your cash advance balance. Therefore, if you're carrying multiple balances, you'll have to pay more than the minimum if you want to reduce the cash advance balance quickly.

When should you get a cash advance?

If you have not notified your travel plans to your bank, you could end up having no access to local currency. You might be disconnected from cash if it suspects fraudulent activity which may result in placing a hold on your card. In such a case, you can get a cash advance as long as your card hasn’t been blocked. 

Also, there might be an instance where you might need cash that you don’t have in the bank. In such a scenario, getting a cash advance is a solid option. Remember, the interest may add up, so try to make sure you only borrow what you can payback.

Alternatives to a credit card cash advance:

• Borrow from family or friends
• Take out a personal loan
• Make use of payment services like Plastiq and many more 

Conclusion:

We have discussed how and when to get a credit card cash advance. Also, we have mentioned the disadvantages of getting a cash advance. Finally, we have mentioned several alternatives to a credit card cash advance as it is an expensive option to consider.