What Is A Cash Advance And Can You Avoid The Fees?

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Published by GreenSprout Experts | 12/20/22

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Even in this day and age, there are still times when only cash will work, for instance, at many small vendors or markets or when buying secondhand items. Once in a while you might find yourself in a situation where you simply need cash but don't have enough in your bank account. Maybe you are waiting on a check payment to clear or for a salary direct deposit, but you need some cash immediately. These are common situations in which people use a cash advance.

What exactly is a cash advance?

To put it simply, a cash advance is using your credit card to buy cash instead of a product or service. It's a quick and easy way to use your credit card to get a cash loan.

Most credit card companies won't let you take your entire credit line as a cash advance, so keep that in mind. Many of them have set maximums, so you might only be able to get a few hundred dollars unless you have stellar credit. Remember that a cash advance is meant for emergency situations, not as an alternative to a loan.

How do I get a cash advance?

Getting a cash advance is easy. If you have a PIN set for your credit card, you can get cash advances directly from an ATM. If you don't have a PIN, you can still get a cash advance at a bank that services the type of credit card you are using.

What is so bad about cash advances?

So let's talk about the downsides: cash advance fees and interest! Many credit card companies charge a flat fee up to a certain amount and then a percentage after that. For example, a common cash advance fee structure is "$10 or 5%, whichever is greater." So, if you get a cash advance of $500, it would cost you $25 in fees.

There is also the possibility of ATM or bank fees. These are charged by the company that issues the cash advance, for instance, the owner of the ATM or bank you use.

Interest is another expensive aspect of a cash advance. Most times, the interest rate for cash advances is much higher your normal rate, and it can start accruing immediately rather than on your next billing cycle.

With some credit cards, you can be charged a cash advance fee for cash-equivalent transactions. These are transactions that are treated like a cash advance even though you haven't taken out cash from an ATM. For example, you'll be charged a cash advance fee if you use your credit card as overdraft protection, purchase a money order, put money on a reloadable gift card, buy lottery tickets, or send money to another person. The fee for cash-equivalent transactions may be different from the regular cash advance fee.

Can I avoid cash advance fees?

First, we'd like to say that cash advances are only meant for emergency situations and should not be used on a regular basis. If you ever find yourself in a situation where you think you need to use a cash advance, here are some helpful tips to consider.

The bottom line is, you can't avoid the fees. Even if you use your credit card to send money through an online P2P transfer, the credit company will consider it a cash advance and charge you the relevant fees.

Here are some alternatives you should consider:

Borrow it - Ask a family member or friend or even your boss if you can borrow the money, as long as you're sure you can pay it back promptly.

Paycheck advance - There are apps that can give you cash for your paycheck early, but of course they also take a piece. Even so, this could still be better than a cash advance.

Personal loan - If the fees and/or interest rates are lower and you can qualify, then this is a better way to get cash quickly.

P2P loan - Peer-to-peer loans are a relatively new method, and fees/interest rates can vary. Make sure to check the fine print.

Payday loan - While this is a legitimate alternative, we do not recommend it because the fees and interest can be sky high.

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