What you can do and what it costs

You can move money from a credit card to a bank account, but it is not the same as withdrawing cash from an ATM. The most common way is called a cash advance, and it costs you money upfront — usually a fee of 3 to 5 percent of the amount you withdraw, plus interest that starts right away. Some credit card companies also offer balance transfer checks, which work like regular checks but draw from your credit line instead of a bank account. A third option is a money transfer through your card issuer, which moves funds directly to your bank but also charges a fee and interest.

The reason these cost more than a regular purchase is that credit card companies treat them differently. When you buy something with your card, the company gives you a grace period before charging interest — usually 21 to 25 days. With a cash advance or money transfer, interest starts accruing the day you take the money, with no grace period. This makes these options expensive if you need the money for more than a few days.

Key Takeaways

  • Cash advances charge a fee (usually 3 to 5 percent) plus interest that starts when ready, with no grace period like a regular purchase has.
  • Balance transfer checks work like regular checks but draw from your credit card and carry the same fees and interest as a cash advance.
  • Money transfers through your card issuer move funds directly to your bank account but cost a fee and charge interest from day one.
  • If you need money for a short time, a personal loan or a line of credit from your bank may cost less than a cash advance.

How a cash advance works

A cash advance is the most straightforward way to get cash from your credit card. You go to an ATM, insert your card, and withdraw money just like you would from a debit card — except the money comes from your credit line, not your bank account. Your card issuer charges you a fee right away, usually shown as a percentage of the amount withdrawn. If you withdraw $500 and the fee is 5 percent, you owe $25 plus the original $500.

Interest starts accruing when ready on the full amount you withdrew. If your card's interest rate is 20 percent annually, that is roughly 0.05 percent per day. The longer you carry the balance, the more interest you pay. If you pay back the $500 plus $25 fee within a week, you might owe another $5 or $6 in interest. If you carry it for a month, the interest could be $8 to $10. This is why a cash advance is only worth considering if you can pay it back very quickly.

Balance transfer checks and money transfers

Some credit card companies send you checks that draw from your credit line instead of a bank account. You write one like a regular check, and the recipient deposits it into their account. The card issuer charges a fee (usually 3 to 5 percent) and starts charging interest when ready. The advantage is that you can mail the check or give it to someone else, rather than withdrawing cash yourself. The disadvantage is that you have no grace period and the fee is the same as a cash advance.

A money transfer is a direct deposit from your credit card to your bank account. You request it through your card issuer's website or app, and the funds arrive in your bank account within one to three business days. Like a cash advance, it charges a fee and interest from day one. The main difference is convenience — you do not have to go to an ATM or write a check. But the cost is identical.

When a cash advance makes sense

A cash advance is worth considering only in specific situations. If you have an unexpected expense and you know you can pay back the full amount within a few days, the fee and interest might be acceptable. For example, if you need $300 for an emergency car repair and you will have the money from your next paycheck in four days, a cash advance fee of $15 and interest of $1 or $2 is cheaper than bouncing a check or paying a late fee on a bill.

A cash advance also makes sense if it is your only option and the alternative is worse. If you have no savings and no access to a personal loan, and you face a genuine hardship, a cash advance is better than nothing. But it should be a last resort, not a regular way to access money. The fees and interest add up quickly, and if you cannot pay back the balance right away, you end up paying far more than you borrowed.

Cheaper alternatives to consider

Before taking a cash advance, explore other options. If your bank offers a personal line of credit, it usually charges lower interest than a credit card cash advance and may have no upfront fee. You only pay interest on the money you actually use, and you can draw from it multiple times. Some banks also offer personal loans, which give you a lump sum upfront at a fixed interest rate. The rate is often lower than a credit card rate, especially if you have decent credit.

If you have a friend or family member who can lend you money, that is almost always cheaper than a cash advance. If you have a 401(k) or similar retirement account, some plans allow you to borrow against your own balance at a low interest rate, though this has tax consequences if you do not pay it back on time. A credit union, if you are a member, may offer small loans or lines of credit at lower rates than a traditional bank. The point is to exhaust these options before paying a cash advance fee.

How cash advances affect your credit

Taking a cash advance does not directly hurt your credit score, but it can indirectly. A cash advance increases your credit card balance, which raises your credit utilization ratio — the percentage of your available credit that you are using. If you normally use 20 percent of your credit limit and a cash advance pushes you to 40 percent, your score may drop slightly. The effect is temporary and recovers once you pay down the balance.

The bigger risk is if you cannot pay back the cash advance quickly. If the balance sits on your card for months, you pay a lot of interest and your utilization stays high, both of which hurt your score. If you miss a payment, the damage is much worse. This is why it is important to have a plan to pay back a cash advance before you take it.

Frequently Asked Questions

Can I use a credit card cash advance to pay another credit card?

Technically yes, but it is a bad idea. You would pay a cash advance fee on the money, then when ready owe interest on it. You would be paying to move money from one card to another, which costs you money with no benefit. If you are trying to consolidate debt, a balance transfer (moving the balance itself, not cash) is cheaper.

What is the difference between a cash advance and a balance transfer?

A cash advance gives you cash from your credit line and charges a fee plus interest. A balance transfer moves an existing balance from one credit card to another, usually with a lower interest rate for a set period. Balance transfers are for moving debt between cards; cash advances are for getting cash.

Do I have to pay back a cash advance right away?

No, but you should. Interest starts when ready and compounds daily. If you carry a $500 cash advance for six months at 20 percent interest, you could owe $50 or more in interest alone, on top of the upfront fee. The longer you wait, the more you pay.

Can I get a cash advance if my credit is bad?

Yes. If you have a credit card, you can take a cash advance on it regardless of your credit score. Your card issuer has already decided to give you a credit line, so they will let you access it as a cash advance. The fee and interest rate are the same whether your credit is good or bad.

What happens if I cannot pay back the cash advance?

The balance stays on your credit card and you keep paying interest on it. If you miss a payment, your card issuer reports it to the credit bureaus and your score drops. You may also face late fees and a higher interest rate. If the debt goes unpaid for long enough, the card issuer may send it to a collection agency.