Credit Card Cash Advance: Advantages, Disadvantages and Costs Explained
Published 17th of May 2012·Updated 4 April 2026
Reviewed by: Reviewed for accuracy April 2026
A credit card cash advance lets you withdraw cash at an ATM using your credit card and PIN. Unlike a normal purchase, interest starts accruing immediately with no grace period, and most card providers charge a separate cash advance fee on top. It is one of the most expensive ways to borrow money and should only be used as a last resort.
Short Summary
Interest on cash advances starts the moment you withdraw the cash. There is no interest-free period, unlike spending on a credit card.
Most credit card providers charge a cash advance fee of 2% to 5% of the amount withdrawn, on top of the higher interest rate that typically applies to cash transactions.
Your card's cash advance limit is usually lower than your overall credit limit. Check your credit agreement to find out how much you can withdraw.
Under FCA-regulated credit card rules, card providers must apply your repayments to the highest-interest debt first. This means cash advance balances should now be cleared before lower-rate balances, which was not always the case before 2011 regulations.
If you need cash urgently, a 0% purchase credit card, an arranged overdraft or a credit union loan are likely to be cheaper alternatives worth considering before taking a cash advance.
What is a credit card cash advance?
A credit card cash advance allows you to withdraw cash from an ATM using your credit card, up to a cash limit set by your card provider. This limit is separate from your overall credit limit and is usually lower. The cash counts as borrowed money, and your card provider charges interest on it from the day you withdraw it.
Some card providers also allow cash advances via bank transfer or cheque. In all cases, the same high charges apply.
What does a credit card cash advance cost?
Cash advances are expensive compared to other forms of borrowing. The costs typically include two separate charges:
| Cost type | Typical amount |
|---|---|
| Cash advance fee | 2% to 5% of the withdrawal (minimum £3 to £5) |
| Cash advance interest rate | 25% to 30% APR (higher than purchase rate) |
| ATM fee (some machines) | Up to £2 per withdrawal |
| Interest-free period | None - interest starts immediately |
For example, if you withdraw £300 on a card with a 3% fee and 29.9% APR, you pay a £9 fee immediately plus daily interest from the moment the cash leaves the machine.
Does a cash advance affect my credit score?
Taking a cash advance does not directly add a negative marker to your credit file. However, it increases your credit utilisation rate, and repeated cash advances can signal financial difficulty to lenders. High credit utilisation above 30 per cent of your available limit can lower your score with agencies including Experian, Equifax and TransUnion.
What are the advantages of a credit card cash advance?
The main advantage is speed and convenience. If you need cash and have no other option, a credit card cash advance gives you immediate access to funds without an application or credit check.
It may also be useful in situations where card payments are not accepted, such as certain markets, smaller traders or overseas locations. In those cases, having access to local currency quickly can be valuable.
What are the disadvantages of a credit card cash advance?
The disadvantages significantly outweigh the advantages for most people:
- Interest starts immediately, with no grace period
- The interest rate is higher than the standard purchase rate
- An additional cash advance fee applies to every withdrawal
- Some ATMs charge a separate machine fee on top
- Repeated use can signal financial stress to future lenders
Unlike a payday loan, a cash advance does not appear as a separate credit product on your file. But the cost structure is similarly punishing if the balance is not cleared quickly.
What are the alternatives to a credit card cash advance?
If you need money quickly, these options are generally cheaper:
| Option | Cost | Speed |
|---|---|---|
| Arranged overdraft | Typically 20% to 40% EAR | Instant (if already arranged) |
| 0% purchase credit card | 0% for introductory period | 1 to 3 days to receive card |
| Credit union loan | Often 3% to 12.7% APR | 1 to 5 days |
| Personal loan (high-street bank) | 6% to 30% APR depending on credit score | 1 to 3 days |
| Borrowing from family or friends | Potentially interest-free | Immediate |
StepChange and the Money Advice Service both recommend exhausting arranged credit options before resorting to high-cost borrowing.
How to minimise the cost if you do take a cash advance
If a cash advance is unavoidable, take steps to reduce the damage:
- Use a fee-free ATM to avoid the machine charge on top of your card fee.
- Withdraw what you need and nothing more; the fee is proportional, but interest compounds daily.
- Pay off the cash advance balance as quickly as possible, ideally within days rather than weeks.
- Check whether your card has a lower cash advance rate; some specialist travel cards charge less than the typical 29.9% APR.
Frequently Asked Questions
Does interest on a credit card cash advance start immediately?
Yes. Unlike purchases, where most cards offer up to 56 days interest-free, a cash advance starts accruing interest from the day you withdraw the money. There is no grace period under any standard UK credit card agreement.
What is the typical cash advance fee on a UK credit card?
Most UK credit card providers charge between 2% and 5% of the amount withdrawn, with a minimum fee of around £3 to £5. This is charged on top of the higher interest rate that applies to cash transactions. Always check your specific card's terms before withdrawing.
Can I use my credit card to withdraw cash abroad?
Yes, but additional charges often apply. Many card providers add a foreign transaction fee of 2% to 3% on top of the standard cash advance fee and interest. A specialist travel card such as those from Halifax or Starling Bank (which operates as a bank rather than a credit card provider) can reduce or eliminate these charges.
Will taking a cash advance hurt my credit score?
Not directly, but it increases your credit utilisation ratio. If your advance pushes your utilisation above 30 per cent of your total credit limit, this can lower your score with Experian, Equifax and TransUnion. Lenders may also view a pattern of cash advances as a sign of financial difficulty.
Is a credit card cash advance better than a payday loan?
In most cases, yes, provided you repay the balance quickly. A payday loan typically costs significantly more in interest and fees over a short period, and a missed payment can trigger default charges and damage your credit record more severely. However, both are expensive forms of borrowing and should be treated as a last resort.