What Is a Cash Advance and How to Get Cash from Credit Cards

Many people wonder how to get cash from a credit card and what cash advance means. These are excellent questions to ask because it’s important to understand all of your financial options whenever you need money quickly and aren’t sure where to turn.

A cash advance is a short-term loan against your credit line that your credit card issuer offers. You can get this money quickly through your bank or even an ATM.

In this Tower Loan article, we cover answers to what is a cash advance and how does a cash advance work, as well as the associated costs, impact on your credit, and alternative options.

What is a Credit Card Cash Advance?

What is a cash advance? It involves borrowing cash against your credit card’s available credit and can help you get the money you need quickly and efficiently.

Cash advances are similar to loans in that they must be repaid. However, they typically come at a higher cost and are similar to regular credit card purchases.

With a cash advance, you can’t exceed the current balance on your credit card. The advance is added to your credit card balance, which you will repay over time.

How Does a Credit Card Cash Advance Work?

How does a cash advance work? If you’re wondering how to get a cash advance on a credit card, the process usually begins by visiting an ATM and using your card and PIN.

You can also use checks provided by your credit card issuer or get a credit card cash advance by visiting your bank or other financial institution in person. This financial tool has an immediate interest accrual and no grace period like with regular credit card purchases. A cash advance limit applies, typically a percentage of the total credit line, such as 30 percent.

So, how long does a cash advance take? You may be able to get money from an advance as soon as one day, but it could take up to several business days before it posts.

Costs Associated with Credit Card Cash Advances

As you research how to get cash from a credit card, it’s crucial to learn about the fees associated with advances. The typical fees are three to five percent of the advance or a flat rate. You may also pay additional ATM fees if you use an ATM to obtain the cash advance.

Be aware of interest rates that apply to credit card cash advances, which are usually higher than regular credit card purchase rates. This interest starts accruing immediately without any grace period. If you use a bank that is not within your credit card issuer’s network, you may face even more fees with a cash advance loan.

Impact on Your Credit Score

The next important consideration is what cash advance means for your credit score. Cash advances affect credit utilization, which is a significant factor in your credit score. If you don’t pay back your cash advance on time, this can also affect your credit score and payment history.

An occasional credit card cash advance may not hurt your credit if it is repaid promptly. However, frequent and habitual use of this financial tool can be detrimental to your credit, future purchasing power, and overall financial stability.

Why Cash Advances Are Generally Not Recommended

Although learning more about your options and asking, “What is a cash advance?” is a great idea, most financial professionals do not recommend this method of obtaining money.

This is because credit card cash advances are associated with higher costs than other borrowing methods. Due to the high-interest fees that impact you immediately, you are also at high risk of falling into a cycle of debt.

However, there are certain circumstances where credit card cash advances make sense and are a logical choice, such as during an emergency or when no other options are available.

Alternatives to Credit Card Cash Advances

Fortunately, there are various alternatives to credit card cash advances to explore before deciding to get cash from a credit card. Here are some ideas to consider.

Personal Loans

Personal loans, like the ones we offer at Tower Loan, can be used for a variety of purposes and allow you to pay fixed payment amounts over time. You’ll typically have lower interest rates with personal loans than cash advances, and they can even be used as a tool for building your credit when you make payments on time.

Balance Transfer or Promotional Offers

Another option is to look into balance transfers and promotional offers on credit cards. Some cards offer lower interest rates for specific types of cash-like transactions and offer advantages over advances.

Borrowing from Friends/Family

An informal way to get the money you need now is to borrow from friends or family. It can be awkward and uncomfortable asking people you know for money, perhaps even strain your relationships. However, if you have loved ones with money to lend, they might offer no-interest or low-interest funding and be flexible with the repayment timeframe.

Other Creative Solutions

There are many other ways to make cash quickly, such as going through your home and selling items you no longer need or want. You can also pick upside gigs and odd jobs to help make ends meet, such as yard work, house cleaning, or walking dogs. TaskRabbit and Rover are good resources to check out and sign up on to find work when you need to earn some extra income.

Tips to Minimize the Need for Cash Advances

Now that you understand the answer to “What is a cash advance?” here are some tips for avoiding the need for one:

• Create a budget and stick to it with monthly expenses
• Set money aside in an emergency fund
• Explore credit card features to help with emergencies, such as mobile payment options
• Always use credit cards responsibly to avoid relying on cash advances

Deciding What Cash Advance Means for You

As we have discussed, credit card cash advances are expensive and should only be used as a last resort when you need money. It’s important to consider all other alternatives before deciding how to get cash from a credit card.

Fortunately, there are many safer borrowing options, including installment loans, that might be a better fit for your personal financial situation. If you are unsure about which route to take to get the money you need affordably and responsibly, it is also a smart idea to consult a financial advisor for personalized advice.

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