What Is a Cash Advance on a Credit Card?

A cash advance on a credit card lets you borrow cash against your available credit limit.

You may be able to withdraw money from an ATM, receive cash at a bank branch or complete another transaction that your card issuer treats as a cash advance.

Unlike regular purchases, cash advances usually start charging interest immediately and may include an additional fee.

KOHO Cash Advance

KOHO Cover is not a traditional credit card cash advance. It is a cash advance designed for Canadians who need a smaller amount of money to cover short-term expenses.

With KOHO Cash Advance, you can:

• Get up to $500 as an instant cash advance, depending on eligibility
• Pay no interest on the advance
• Avoid a credit check
• Repay automatically once you add money or get paid

You need a Cover bundle subscription, which comes with a monthly fee. The bundle also includes benefits such as a credit report, financial coaching and priority support.

How Does a Credit Card Cash Advance Work?

A credit card gives you access to a revolving credit limit.

Part of that limit may be available for cash advances.

For example, if your credit card has a $5,000 limit and a $1,500 cash advance limit, you may be able to withdraw up to $1,500 in cash.

The amount you borrow is added to your credit card balance and must be repaid.

How Can You Get a Cash Advance From a Credit Card?

Depending on your card issuer, you may be able to get one through:

ATM withdrawal

You can use your credit card and PIN at a compatible ATM.

The ATM operator may also charge a fee.

Bank branch

Some financial institutions allow you to request a cash advance in person.

You may need to provide identification.

Convenience cheque

Some issuers provide cheques that draw against your credit card account.

These transactions are generally treated as cash advances.

Cash-like transactions

Certain purchases may also be classified as cash advances.

Examples can include some money transfers, gambling transactions or purchases of cash-equivalent products.

Check your card agreement to understand which transactions are included.

How Much Does a Credit Card Cash Advance Cost?

A cash advance can involve several charges.

You may pay:

• A cash advance fee
• A higher interest rate than regular purchases
• ATM fees
• Foreign transaction or currency conversion fees when travelling

These costs can make cash advances significantly more expensive than using your credit card for a normal purchase.

Does Interest Start Immediately?

Usually, yes.

Regular credit card purchases may receive an interest-free grace period when you pay your statement balance in full by the due date.

Cash advances generally do not.

Interest usually starts accumulating from the day you take the advance.

That means even borrowing for a few days can result in interest charges.

Is the Cash Advance Interest Rate Different?

It can be.

Some credit cards charge a higher annual interest rate for cash advances than for regular purchases.

Your statement or cardholder agreement should show separate rates for:

• Purchases
• Cash advances
• Balance transfers, when applicable

Check the cash advance rate specifically rather than assuming the regular purchase rate applies.

Is There a Cash Advance Limit?

Yes.

Your cash advance limit may be lower than your overall credit limit.

For example, you could have:

• $10,000 total credit limit
• $3,000 cash advance limit

ATM withdrawal limits may further restrict how much you can take out at once.

You can usually find your available cash advance limit through online banking or your credit card statement.

Does a Credit Card Cash Advance Affect Your Credit Score?

It can indirectly.

A cash advance increases your outstanding credit card balance.

That can increase your credit utilization ratio.

For example, taking a $1,500 advance on a card with a $3,000 limit would use half of the card's available credit before accounting for any other purchases.

High credit utilization can negatively affect your credit score.

Missing your required payments can also damage your credit history.

Can You Pay a Cash Advance Back Immediately?

Yes.

You can generally repay a credit card cash advance as soon as you have the money.

Because interest usually starts immediately, repaying quickly can reduce the amount of interest you pay.

However, an upfront cash advance fee may still apply.

Check how your issuer applies payments if you also have regular purchases on the card.

Is a Credit Card Cash Advance the Same as a Payday Loan?

No.

A credit card cash advance uses an existing credit card account.

A payday loan is a separate short-term loan usually designed to be repaid around your next payday.

Both can be expensive, but their fees, interest rates and repayment structures are different.

Compare the total borrowing cost before using either one.

Is a Credit Card Cash Advance the Same as a Cash Advance App?

No.

A cash advance app may provide a small advance based on income or banking activity.

Some charge no traditional interest but may use subscription or instant-transfer fees.

A credit card cash advance is borrowing directly from your credit card limit and usually begins charging interest right away.

When Might a Credit Card Cash Advance Make Sense?

A cash advance may be useful when you urgently need physical cash and do not have a lower-cost option available.

However, before using one, consider alternatives such as:

• A line of credit
• A small personal loan
• A lower-cost cash advance service
• An employer wage advance
• A payment arrangement with a creditor

The best option depends on how much you need and how quickly you can repay it.

What Should You Check Before Taking a Cash Advance?

Before withdrawing money, check:

• Your cash advance limit
• The cash advance interest rate
• The upfront fee
• ATM charges
• How repayment is applied
• Whether a cheaper option is available