One of the transactions you can make on your credit card is a cash advance. Taking out a credit card cash advance is like withdrawing cash from the ATM by using your debit card, only with a credit card cash advance you're borrowing cash from your credit limit, not drawing it from your checking account. When you take out an advance on your credit card, you have to repay the money just as you would with purchases you make on your credit card.
The Cash Advance Fee
Your credit card issuer isn't really doing you any favors by letting you take out a cash advance, which can be done via ATM or through convenience checks your card issuer sends in the mail. They'll make money off the transaction by charging a cash advance fee each time you take out a cash advance against your credit limit. That's on top of interest charged as of the day you make the cash advance.
How Much Is a Credit Card Cash Advance Fee?
The exact amount of your cash advance fee depends on the amount of your advance and the method your credit card issuer uses to calculate the fee.
Most credit card issuers charge either a flat fee or a percentage of the cash advance amount, whichever is greater. For example, a typical cash advance fee is the greater of $10 or 5%. So, if you take out a cash advance of $100 under these terms, your cash advance fee would be $10, since 5% of $100 is only $5. On the other hand, if you take out a cash advance of $500, your cash advance fee would be $25.
With some credit cards, you can be charged a cash advance fee for cash-equivalent transactions, which are transactions that are treated like cash advances even though you haven't taken out cash from an ATM. For example, you'll also 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 a cash-equivalent transaction may be different from the regular cash advance fee.
Your credit card issuer is required to disclose the method it uses to calculate your cash advance fee.
Refer to your credit card agreement or the back of your billing statement for more information on your cash advance fee.
If you have questions about your cash advance fee, contact your credit card's customer service department by calling the number on the back of your credit card. Know how the fee is calculated before you take out a cash advance, so you won't be caught off guard.
Can You Avoid a Cash Advance Fee?
The only way to avoid a cash advance fee is by avoiding cash advances and cash equivalent transactions on your credit card. If you can't avoid the transaction completely, you can minimize the cash advance fee you pay by reducing the amount of cash you withdraw on your credit card. Since interest starts accruing right away on a cash advance, paying your cash advance back quickly will lower the overall cost of the advance.
Frequently Asked Questions (FAQs)
Are there any credit cards that don't charge cash advance fees?
Not all credit card lenders charge cash advance fees so it can be helpful to do your research to find one that doesn't if you frequently find yourself having to get cash this way. You might have more luck with credit unions. LendingTree recommends Pentagon Federal Credit Union (PenFed) cards. You must normally qualify for a credit union, but PenFed is open to anyone.
What other fees can credit card companies charge in addition to cash advance fees and interest?
Most credit card lenders charge annual fees for the privilege of using their cards. You'll probably also have to pay extra fees if you go over your credit limit or make a late payment.