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What are Cash Advance Fees?

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  • Written By: N. Madison
  • Edited By: Bronwyn Harris
  • Last Modified Date: 05 November 2016
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A cash advance fee is a fee or charge a credit card holder must pay when he takes a cash advance from his credit card. For example, a person may have a $500 US Dollars (USD) credit line on his credit card. He could go out and purchase goods or services with his credit card, or he could purchase something online. If he used his card to spend $100 USD at a store, this would be considered a charge. If he went to an ATM machine and withdrew $100 USD, however, this would be considered a cash advance, and he would be charged a fee.

Cash advance fees can be expensive. In many cases, a person will incur a two to four percent charge when he takes a cash advance. However, this is not all he’s likely to pay. Some credit card companies charge not only cash advance fees, but also extra interest when a cardholder takes a cash advance. Furthermore, many of the credit card companies that offer grace periods on purchases do not offer them on cash advances. This translates into paying cash advance fees and incurring hefty interest right away.

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Some credit card companies don’t set fees based on just a percentage of the cash advance. In some cases, a person may be required to pay both a percentage of the cash advance and a flat fee. For example, he may be charged two percent of his cash advance and $15 USD no matter how much money he requests. Other credit card companies may add either a percentage or a flat fee, charging the consumer whichever amount is highest.

Credit card users should also learn how their credit card companies apply payments when they are considering a cash advance. Payments are often applied to purchases first and cash advances second. This may not be a problem for people who pay their total bills off each month, but those who carry balances may end up paying more in the long run because of the increased interest when a balance is left over from month to month.

With such high cash advance fees and interest, it may be hard to understand why anyone would want to take a cash advance. The fact of the matter is they are tempting because they provide quick access to cash when a person needs it. They can be good for emergency needs, but many financial experts recommend considering them only as a last resort.

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popcorn
Post 7

Does anyone have any experience with online cash advances and the fees related?

I am a in a bit of a financial bind and don't get paid for another week. I really need to get my car fixed right away or I won't be able to get to work. I have already maxed out my credit cards and overdraft from my bank just isn't an option.

The online site I am visiting guarantees the money deposited directly into my bank after approval and I have 14 days to pay it back. I think the interest is like 20% or something. I am worried about getting hit by mystery fees though.

Sara007
Post 6

@wander - My family and I use a cash advance with no fees credit card when we travel around the country. We also find it really handy to have something on us that is so widely accepted. Especially when you consider things like debit fees.

Our bank is terrible for charging us high debit fees on transactions done from ATMs that aren't our banks. We not only get hit by the ATM itself but our bank also charges us $2-$3 per transaction. I think sometimes cash advances off credit cards can be cheaper than using your regular bank card. I suppose it is just a matter of shopping around for products that work for you though.

wander
Post 5

I travel quite a bit and have found a credit card that gives cash advances with low fees because of how frequently I have to use the service. It is just not safe to carry huge wads of cash in some countries and find that internationally credit cards work much better.

In general the fees work out to $5 per transaction when all is said and done. I figure if you pay off your credit card right away it is a not a bad deal for the piece of mind I have. I suppose the reality is that a lot of countries don't take traveller's checks and even if they do it can be really difficult to find a place to cash them.

julies
Post 4

@sunshined - In most cases cash advance fees from a credit card company would be less than getting a payday loan. The cash advance charge from a payday loan business can be very high.

Even by the time you factor in possible ATM fees with a cash advance, this would probably be the better option. You will also want to know what your cash advance limit is. This will probably be less than your credit limit, but that is not necessarily a bad thing.

A couple other options for you may be to ask your employer for an advance on your paycheck. Depending on the type of company your work for, this might be an option.

When I

had a tough time and needed to come up with some extra cash, I was able to borrow the money from a friend. He knew I would pay it back, and was generous enough to loan me the money.

These are just a couple other options you might consider to avoid such costly cash advance fees.

sunshined
Post 3

Would taking a cash advance on your credit card be as expensive as going somewhere and getting a payday cash loan?

Either way, I know there will be extra fees and you are paying a premium to get your hands on this money, but I am trying to decide which one would have the lower fees.

I see credit card cash advance fees as being the better option just because I don't have to fill out any additional paperwork.

I drive by a couple places every day that will give you an advance on your upcoming paycheck and it all sounds so easy.

I have never had to do something like this before, but am in a situation where I need some extra cash. Once I get my tax refund back, I can pay it back, but I need some cash quickly before that time comes.

golf07
Post 2

@John57 - When I get checks in the mail from my credit card company, I get rid of them too. For some people, this is hard to do, and they almost look at it like money being given to them.

I have some friends who are currently going through some consumer credit counseling from making a lot of bad choices like this.

It started when one of them lost their job, and they were using cash advances to buy food and gas. Between the credit card fees and purchases, they got themselves in a lot of debt and couldn't see a way out.

Currently they are on a 5 year plan to get out of debt and get back on track. This has not been easy for them, but at least they are working at it and not taking the easy way out.

John57
Post 1

Taking advantage of a credit card cash advance is pretty tempting when you are in a tough situation.

I had some major, unexpected car repair bills and didn't know how I was going to pay for them. I couldn't wait to get my car repaired as I had no other way to get to work.

My credit card company sends me blank checks from time to time. Usually I shred them so I am not tempted to use them for frivolous purchases.

This time I had to use one of them to pay for my car repair bill. This was treated the same way as a cash advance. Even though I am thankful I had a way

to pay for the bill, this is something I don't want to get in the habit of doing.

You pay quite a bit in fees for the convenience of being able to get an advance on this cash without going through a loan process.

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