Credit Card Cash Advance vs. Cash Advance Online Loan

by Jim Hughes   September 17, 2015

According to a recent report from the Federal Reserve, nearly half of Americans do not have enough emergency savings to cover an unexpected $400 expense. So what do they do when disaster strikes? Many turn to their credit cards. If you have a credit card, chances are you have access to a credit card cash advance. You should know, though, that this service is not the same as a cash advance loan. Let’s look at the differences between these two ways to get emergency cash. You can use your credit card for a credit card cash advance.  

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What is a Credit Card Cash Advance?

  • Definition. The exact specifics vary by issuer and individual credit card. But generally speaking, a credit card cash advance is a way to withdraw cash using your credit card at an ATM or financial agency. Some credit card purchases count as a cash advance as well. We outline these later on in the article.
  • Interest and fees. You should expect to pay a higher fee and interest rate for a cash advance than you’d pay for a regular credit card expense. If you take one out, don’t assume that you’ll quickly pay it off if you only pay your minimum balance each month. That minimum balance might be associated with your regular credit card payment, and if that’s the case, you wouldn’t shrink your cash advance principal by paying off the minimum balance.
  • When interest starts. The interest for this type of cash advance usually starts to accrue the moment you take out the cash advance. That’s different from how other credit card purchases work. Like, when you swipe a card for a regular payment, the interest usually won’t start to accrue until after a set grace period has passed.
  • Examples. According to a recent CBS News article, the average APR of a credit card cash advance is 24-percent, which is nine points higher than the average purchase APR. On top of the interest, most issuers will charge a fee, which tends to be around 5-percent or $10, whichever one is higher. So, if you were to take out a $1,000 cash advance and pay it off in 30-days, you’d be looking at around a $69 loan cost. Don’t forget – if you use an ATM for the transaction, you will likely also be charged an ATM fee (usually to the tune of $2 to $5).

 Legal gambling charges could end up being charged as a cash advance on your credit card.



What can you use a Credit Card Cash Advance For?

If you take the money out at of an ATM, you can use it anywhere that accepts cash. In other words: you won’t be asked what the cash advance is for. But, you should know that some credit card purchases count as a cash advance and are subject to those fees. So even if you didn’t specifically ask for a cash advance, you could be paying for one if you use your credit card to fund:

  • Money orders
  • Wire transfers
  • Bail bonds
  • Legal gambling

So be careful what you use your credit card for. If you have a question about whether a purchase will count as a cash advance or not, it’s best to contact your credit card issuer directly.  

Are Credit Card Cash Advances Bad?

So far we’ve been pretty complimentary in our assessment of credit card cash advances. But the truth is, they are pretty expensive when you compare them to a traditional bank loan. Like we mentioned earlier, the average APR for one of these ends up being around 24-percent. That can really add up if it takes you a while to pay off the advance. So if you have a good credit score and can stand to wait a little longer for the funds, it might be better to apply for a low-interest loan. Although, we will admit that sounds like a hassle when you consider how much easier it would be to just use an ATM machine. Compare credit card cash advances to short-term, small-dollar loans.  

How do they Compare to a Cash Advance Loan?

You’ll likely pay lower fees for a credit card cash advance than you’d pay for a cash advance loan. One of the reasons credit card issuers can afford to charge less is because they take on less risk, which usually results in a lower default rate. Storefront lenders loan to people of all credit types, which means they take on more risk and sometimes a higher default rate. It’s expensive to have a high default rate. Those expenses are passed on to the borrower in the form of a higher interest rate. Another benefit of a credit card cash advance is the lack of a loan term. If you can’t pay off a cash advance loan by the end of the loan term, you might have to take out another loan. The new loan will likely come with new fees. With a credit card cash advance, though, the debt usually won’t include a due date. You only have to pay a minimum balance on each month (but remember, that minimum balance might not be associated with your cash advance and might represent a different account). That means no rollover fees. Of course, it’s better to pay off your debt as fast as you can. The sooner you pay off your credit card debt, the less interest you will end up paying.  

Still Can’t Decide?

If you still can’t decide between a credit card cash advance and one from a storefront lender, we recommend using your credit card first, since that will likely save you money. If that’s not an option, we can help you try to find a reputable lender for a cash advance loan. To get started, fill out our loan request form. Then we’ll try to connect you with a lender.

Jim Hughes   OpenCashAdvance Marketing Manager
Personal Finance
Jim Hughes remembers checking his first email on the original BlackBerry 850 nearly 20 years ago. It was spam, and he fell for it. Even so, he’s been on the beat every day since, following the ebbs and flows of financial technology. Look to Jim for insider exclusives on shorter-duration loans, installment loans, and other popular products in fintech today.
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