A cash advance on a credit card allows cardholders to withdraw cash, typically from an ATM or bank teller, using their credit card. It can act as a short-term loan and help enable quick access to funds by borrowing against a card’s line of credit.
Need cash fast? A credit card cash advance may seem like a quick solution, but it's essential to understand the true cost.
While a cash advance provides immediate cash, it also often comes with higher interest rates, upfront fees, and no grace period for interest accrual.
Read on to learn about credit card cash advances, how they work, and some potential benefits and drawbacks.
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There are different ways to get a cash advance, including:
It’s important to note that the limit on cash advances is typically lower than the overall credit limit available for credit card purchases.
Credit card companies may also categorize other types of transactions as cash advances. These can include using a credit card for:
Cash advances on credit cards come with various fees and costs. Here are potential costs and factors to be aware of:
To illustrate how the cost of a cash advance can add up, here's an example of someone withdrawing $500 from an ATM using their credit card:
If the cash advance isn't paid off immediately, interest will continue to accrue daily on both the $500 principal and the $25 fee. Over time, this can lead to a significantly higher repayment amount than the original $500 withdrawn.
While a cash advance can provide quick access to funds in a pinch, it's generally a high-cost way to borrow money. Cash advance should only be considered after exploring other, less expensive options. Here are some potential implications:
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There are different ways to access cash in an emergency. Here are some examples to consider.
Having a personal savings account can help provide a readily available source of funds. Building a safety net with a savings account is a prudent financial strategy. High-yield savings accounts, such as the PayPal Savings account, may be useful tools for helping grow savings as they offer competitive rates.1
An emergency fund is money set aside specifically for unexpected expenses such as medical emergencies or car repairs. Maintaining an emergency fund can serve as a financial safeguard, which may help avoid reliance on expensive borrowing methods like cash advances when unexpected expenses arise.
Services which allow customers to transfer money quickly and securely can be a viable cash advance alternative if trying to move money between accounts or receive money from someone else.
With a balance transfer card, existing credit card debt can be moved to a new card, often featuring a low or 0% introductory Annual Percentage Rate (APR). This option may assist in reducing debt faster and saving on interest charges. However, be aware of potential fees and the interest rate after the introductory period.
A personal loan is a lump sum borrowed from a lender, repaid in fixed monthly installments. Used for various purposes like debt consolidation, rates depend on creditworthiness. They often have fixed repayment, potentially lower interest than cash advances, and may be secured as an online loan.
Borrowing from friends or family offers a less formal way to get funds. Clear communication, a written agreement, and a repayment plan are crucial to avoid misunderstandings and maintain relationships. Upholding agreed-upon terms and timely repayment are essential.
Taking control of finances is easier when the right tools and information are accessible. When considering credit and financial needs, it's beneficial to look at available credit solutions beyond cash advances to see what may be best.
Learn more about how PayPal's credit card options can help you manage your money for your financial situation.2
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