Credit Card Cash Advance Definition and How It Works

cash advance on a credit card

All is fair in love and war. Yet, the financial side is no exception, too. In times where you are looking for options to get funds, a credit card cash advance would be the solution. 

It could be expensive, yet convenient and fast. If you are about to get a cash advance from a credit card, learn its pros and cons first. At the end of the day, it’s better to foresee the danger in the beginning.

Cash Advance Meaning

Even though credit cards are accepted in large establishments in almost all countries, you still might need cash. In such a case, a credit card cash advance works as a good way to get money quickly. 

After all, you can head to the nearest ATM to access the money. Convenient, right? But the cost of this convenience can be quite high. 

So, what is a cash advance on a credit card? At its most basic, it means taking out a small but very expensive loan from your credit card. In other words, cash advance is a short-term loan secured through your credit card. It’s important to note that the interest begins accruing once the cash is dispensed. 

How to Get a Cash Advance on a Credit Card?

Before you opt for a cash advance on a credit card, it makes sense to learn how it works.

Think of it as a small personal loan that doesn’t require filling out a separate application to get money. 

You simply head to the ATM or bank to get your funds. You only withdraw the amount up to your card’s cash advance limit. To add, no need to pass a credit check when you need money immediately. 

Unlike the money withdrawal from a debit card, the money you take out from a credit card cash advance isn’t yours. As a result, you borrow money from your credit card’s limit that must be paid back in full with interest. Simply put, you use your credit card to buy cash. 

But there are some differences – the amount you can borrow, how you can repay it, and the cost of borrowing. Before you even consider a credit card cash advance, make sure you meet the cash advance requirements. It always makes sense to check your cardholder agreement first. 

What Is a Cash Advance Fee?

The reason why this financial option is rarely recommended is high cash advance fees. Without a doubt, it’s more expensive than regular purchases you would do with a credit card. Below you’ll find things to consider about the cash advance fee.

At the end of the day, the total of all fees for the $100 cash advance could be as little as $13. Thus, you pay $13 for the use of that money for one month. Sometimes, when you think that a cash advance is convenient, keep in mind that banks will charge you for that convenience. 

Cash Advance APR

The reason that could stop you from taking a cash advance is a higher APR than the one for ordinary purchases. This annual percentage of interest you will pay for credit card cash advances may be as high as 25 percent. And here is why. 

When you buy something with your credit card, a bank receives a percentage of your purchase from the merchant. Say you buy a brand-new computer on your credit card. Theoretically, if you don’t pay your issuer back, a bank has the ability to repossess the item.

With a cash advance, taking back the money a bank gave you is impossible. As a result, a bank stands more to lose and increases the rate on cash advance to make up the difference in bank profits. 

Cash Advance Limit

It depends. Well, a bank understands credit card cash advance as a possible sign you’re in financial trouble. It understands it takes a risk. Generally, your credit card cash advance limit is significantly lower compared to purchases. The latter has nothing to do with your credit card limit. 

Typically, it fluctuates between 20% and 50% of your total spending limit. A general rule of thumb is the cash advance limit is about 20 percent of the total credit card limit. 

How to Get Cash from a Credit Card without Cash Advance?

In times where unexpected emergencies make your head spinning, you’re ready to opt even for the most expensive offer but get the funds you need. Yet, even in the darkest times, there are strategies or alternatives that would help you avoid credit card cash advances. 

So, how to get cash from a credit card without cash advance? Know your options.

In case, there is no other way but a credit card cash advance, minimize the amount you take. Calculate how much it might cost you so you fully understand what you’re getting into. 

Cash Advance on a Debit Card

A debit card cash advance is a great option for those who need cash fast. But it works a little differently. 

To get a cash advance with a prepaid debit card, you need to go to a local bank or credit union branch and request an option. Sure, there will be a fee, but a usually small percentage of the total amount withdrawn. 

It’s a good way to take out a lot of money. When it comes to ATM, there’s a daily limit on how much you can withdraw. Usually, it’s somewhat between $300 to $500. In case, you need to take out thousands, debit card advance is the solution. 

Also, you are not limited to your bank only. There are a lot of other financial institutions that offer debit card cash advances. And finally, they don’t carry interest. Typically, the fee will not be higher than the rate for your standard transactions. Calculate how much it might cost you. Odds are, that could be a much cheaper option for fast money. 

Credit Card Cash Advance Without PIN

What is a credit card cash advance without a PIN? In most cases, to take out a cash advance, you’ll have to request the PIN. The only way to do that is to send an email and wait up to 7-10 days until it’s ready. When you need money right away, that would be an obstacle. 

There is also another way out. You need to go to your bank teller and request a cash advance. To verify your data, take your driver’s license or passport. As such, if you have trouble memorizing that four-digit number, this is the only way to get a credit card cash advance. 

Anyway, whether or not you are using a PIN, think twice before taking out cash advances. High interest rates and no grace periods should be your first red flags. Depending on your needs, you may have other choices that make more sense.

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