Advantages and disadvantages of a credit card cash advance

Last Modified 16th of February 2021

A credit card cash advance is a service similar to using a debit card. It allows using your credit card along with the card’s pin in order to withdraw the necessary funds rather than using a r debit card, or applying to payday lenders. But when you withdraw funds from a debit card, you use your own money – so what are the advantages and disadvantages of using a credit card to get a cash advance?

Immediate access to funds

A credit card cash advance allows you to get access to the borrowed funds stipulated in your credit agreement. It is your daily cash limit, your overall credit card limit and the total cash advance limit that your credit card company is authorised to apply for that determine the amount you can borrow.

High fees and interest rates

But, it is important to understand that this type of borrowing implies high interest rates along with associated fees and the schemes that some companies use to get this money back.

You should also pay attention to any ATM fee included into withdrawal. It is also important to understand that the interest charges associated with cash advances take place when you start withdrawing money. Unlike making purchases or taking business loans, there is no grace period or delay for credit card cash advances. Some companies used to add your payments to your card balance with the lowest interest rate. However, this is illegal according to the new credit card regulations. If you do get a cash advance, your credit card company must charge this payment first, as it has the highest interest rate.

So, how can you get the most benefit from cash advance? Firstly make sure that:

1. You understand the terms of your credit card, as well as its fees, credit limit and the way the balance is paid back.
2. Your credit card has zero balance and you’re using a free cash machine
3. You will be able to pay in back quickly.

Of course, there are other ways to get money fast, like consignment shops, equity credit line, guarantor loans, payday loans or peer-to-peer lending. Some of them are not as expensive as credit card cash advances. However, none of these schemes will provide you with extra cash in case you don’t have a debit card by your side.