What Is a Cash Advance Fee on a Credit Card

A cash advance lets you instantly withdraw cash using your credit card, but it incurs a fee called the Cash Advance Fee. It is a borrowing fee for taking out cash from your available credit limit. It depends on the issuer and is normally a percentage of the amount withdrawn. Read more to understand what a Cash Advance Fee is on a credit card.

A cash advance lets cardholders borrow money from their credit card  based on their credit limit. It is commonly done using ATMs, bank withdrawals, or convenience cheques. It differs from typical transactions since they incur fees and a higher interest rate. You can withdraw money using your credit card just like you withdraw money from an ATM savings account. Making an ATM withdrawal using a credit card would be useful, but it often ends in high expense since it involves an immediate charge.

Each financial institution has its own terms for cash advances. The primary fees are:

• Cash Advance Fee
  A percentage of the amount withdrawn or a fixed fee, whichever is greater.

• Interest Rate
  Cash advances carry a higher interest rate than purchases.

• No Grace Period
  Interest begins to accrue from the date of the transaction.

• ATM or Bank Fees
  There may be extra fees when cash is withdrawn from your credit card using a bank ATM. You may be able to withdraw from the card issuer bank ATM or any other ATM, and fees apply accordingly. 

Understanding these different types of fees is important to determine whether it is a good choice for your emergency cash needs. 

A cash advance is convenient and quick but is one of the most costly means of obtaining cash. High fees, upfront interest charges, and possible impact on credit score make it an expensive option.

Besides, cash advances with a credit card can indicate financial trouble to lenders. If you consistently use cash advances, it can hurt your credit profile. So, the question is- Is cash advance bad for credit score? It depends on your payment history and usage frequency. If you repay your cash advance on time without incurring penalties or late fees, it may positively impact your credit score as long as the credit utilisation ratio is low. 

It is not possible to completely avoid cash advance fees, but you can minimise them by following these tips:

• Use other borrowing methods
  A personal line of credit or loan might have more favourable interest rates.

• Look for lower-fee credit cards
  To save money, you can search for the best credit cards with low cash advance fees.

• Budget for cash requirements
  Avoid last-minute withdrawals that incur high fees. This involves adequate planning and proper budgeting. 

• Seek fee-free options
  Some issuers allow small cash withdrawals without fees. Consider applying for a credit card with no cash advance fee option.

• Repay quickly
  Since interest accrues immediately from the day of withdrawal, it helps to learn how to repay a cash advance on a credit card faster to reduce costs.