Is It a Smart Financial Move to Take Out a Cash Advance?

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

what is a cash advance

The great thing about credit cards is that they can offer you protections on purchases that you can’t get when you use cash or a debit card.

And, they can help you leverage your cash flow by allowing you to finance big purchases, instead of paying for them all at once.

But you can’t use a credit card everywhere. Sometimes, you need to use cash.

However, credit card plastic could technically help you in those situations, too. You can take what is a cash advance through your line of credit.

Curious to know what is a cash advance and what happens when you use it? Let’s break it down and see if a cash advance on a credit card is as convenient as it claims.

What is a cash advance on a credit card?

A cash advance on a credit card is a way to withdraw cash using your line of credit.

Credit card companies will even send you cash advance checks that you can use, sometimes called convenience checks. You fill out the check and use it as payment. Just like you would a check from your bank account.

You can use a check and cash it, or you can withdraw cash from an ATM up to a certain limit.

Why take one out? It gives you payment flexibility. Cash advances can help you pay for something you need if cash is the only option for payment.

Depending on your credit card company some purchases that you charge directly on your credit card can count as cash advances too, such as money orders and lottery tickets.

How do cash advances work?

Think of a cash advance like a loan you take through your credit card. You’re just borrowing the cash from your line of credit.

However, just like any other loan, this is money you need to repay. And, the credit card company will assess a fee for allowing you to take out the “loan” in the form of flat fees and interest rates.

Flat fees are based on the amount of the cash advance. It’s usually anywhere from two percent to five percent of the amount borrowed.

The way interest rates work on cash advances is where things can get financially risky. For one, the rate is much higher than the rate you pay when you use your card for normal charges.

Additionally, the interest rate on cash advances can be double what your normal APR is. Some companies charge as much as 29.99% APR to take out cash through your line of credit.

Make sure you understand exactly how that interest is calculated by your credit card company before taking a cash advance on a credit card.

How is interest calculated for cash advances?

Normally, when you charge something to your card today, you usually have a full billing cycle to pay off the charge.

But when it comes to understanding how do cash advances work, it’s important to know the credit card company calculates interest differently. That’s because there’s no grace period.

Whatever balance you create by taking an advance starts accruing interest immediately. Therefore, your costs can rise exponentially for every day you carry the balance.

If you do take a cash advance, you must make a plan to quickly repay the money you borrowed against your own line of credit.

Can you use a cash advance responsibly?

Most people will never have a real use for a cash advance. With all the financial downsides, it’s just not worth the extra cost that you pay when you use this method of payment.

There’s no reason to do it if you can use a credit card. And in cases when you can’t, it almost always makes more sense to wait to make the purchase until you do have cash.

That might mean waiting until you can go by the ATM with your debit card. Or, simply saving up for what you want.

Cash advances shouldn’t be outlawed from your financial toolbox. But using them responsibly might mean using them only in an extreme emergency.

It’s entirely possible that you could find yourself in a situation where you need to make a purchase but the merchant doesn’t accept credit cards — and you don’t have any cash. Using your credit card for a cash advance can help get you out of that sticky situation.

But using a cash advance on a credit card to get cash for discretionary purchases or because you want something (rather than need it) is not a smart money move.

Most people will fare better by exploring other options. Consider taking a personal loan if you need cash for a large purchase or investment. Or, save up the cash you need over a period of time. It may not be an instant fix, but it’s the most financially savvy solution to take if you can.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderRates (APR)Loan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 5.950% APR to 14.740% APR (with AutoPay). Variable rates from 5.825% APR to 14.365% APR (with AutoPay). SoFi rate ranges are current as of May 18, 2018, and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 5.825% APR assumes current 1-month LIBOR rate of 1.90% plus 4.175% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)

2 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate Disclosure: Fixed interest rates range from 4.99% – 16.24% (4.99% – 16.24% APR) based on applicable terms. Lowest rates shown are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

* Important Disclosures for Upgrade Bank


Upgrade Bank Disclosures


  • Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.
  • Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% - 29.99%$1,000 - $50,000
Check rate nowon SLH's secure site
5.83% - 14.74%1$5,000 - $100,000
Check rate nowon SLH's secure site
5.96% - 35.97%*$1,000 - $50,000Visit Upgrade
8.00% - 25.00%$5,000 - $35,000
Check rate nowon SLH's secure site
4.99% - 29.99%$10,000 - $35,000Visit FreedomPlus
4.99% - 16.24%2$5,000 - $50,000Visit Citizens
15.49% - 34.49%$2,000 - $25,000Visit LendingPoint
5.99% - 35.89%$1,000 - $40,000Visit LendingClub
5.49% - 18.24%$5,000 - $75,000Visit Earnest
9.95% - 35.99%$2,000 - $35,000Visit Avant
Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.