What a credit card cash advance really costs: a $500 example

Four separate costs stack up

A cash advance is not a purchase with a different label. Capital One says the cash advance fee typically ranges from 3% to 5% of the amount or a flat amount, whichever is greater, and that the cash advance APR is typically higher than the purchase rate. The CFPB says grace periods typically apply only to purchases, so interest on a cash advance generally starts on the transaction date, and that issuers often apply separate APRs to purchases, cash advances and balance transfers.

On top of the card's charges, the ATM operator may charge its own fee. Regulation E requires the operator to disclose the fee and amount before you are committed and to let you choose whether to continue.

The $500 scenario: repaid after 1, 2 and 6 months

Assumptions: $500 taken at an out-of-network ATM, a 5% fee ($25), a 29.99% cash APR compounded daily on the $500, a $3.50 ATM fee, no other balances, and the whole amount repaid in one payment at the end of each period. We charge interest only on the $500; your issuer may also charge interest on the fee if it is added to the cash balance. These are example inputs, not any issuer's current pricing.

Read the last column carefully. A short advance looks cheap in dollars but very expensive as a rate, because the fee is charged up front. Holding the money longer lowers the effective rate per month but raises the dollars you pay.

Compared with paying the same $500 on the card

If the merchant you need to pay accepts cards, charging the bill directly is a purchase, not a cash advance (unless your agreement classifies that payment type as cash-like). Paid in full by the due date, a purchase costs $0 in interest on a card with a grace period. Carried for six months at a 22.15% purchase APR, the same $500 accrues about $58.37 of interest, roughly half the $109.11 cash advance cost, with no fee.

If you already have a cash advance balance, Regulation Z section 1026.53 requires amounts you pay above the minimum to go first to the balance with the highest APR, which is usually the cash advance. That helps you clear the most expensive part first. Remember too that a cash advance makes your statement balance larger; if you do not pay the full statement balance, the CFPB says you can lose the purchase grace period as well.

Cheaper options to try first

• Emergency savings, even a small amount; see our emergency fund guide for how to build one with automatic transfers.
• Pay the bill directly with the card as a purchase if the biller accepts cards and does not treat it as cash-like.
• Ask the creditor for more time. The CFPB says many issuers will work with you during a financial emergency and suggests explaining what you can pay and for how long.
• Ask your bank or credit union about a small personal loan or a line of credit and compare the APR and fees with the cash advance numbers above.
• If debt is the underlying problem, the CFPB suggests credit counseling, many of which are nonprofits; ask about fees first.
• Avoid convenience checks from your issuer unless you have confirmed they are priced as purchases; Capital One lists them as a cash advance method.

If you take one anyway: a short checklist

• Find your card's cash advance APR, fee and cash limit in the agreement or on the statement; Capital One says the amount you can take may depend on your issuer's cash advance limits.
• Use your issuer's or an in-network ATM, and cancel if the ATM screen shows an operator fee you did not expect.
• Take only what you need; the fee scales with the amount.
• Repay it as soon as possible and pay more than the minimum so the excess goes to the cash balance first.
• Do not use the card for cash-like transactions such as money orders, wires or gaming purchases unless you have checked how they are classified.