What is cash advance on a credit card & how does it work?

What is cash advance on a credit card & how does it work?

A credit card cash advance is a withdrawal of cash from your credit card account. Essentially, you’re borrowing against your credit card to put cash in your pocket. 

Credit card cash advances let you tap into your credit line to get cash when you need it, but it's important to understand the costs of a cash advance and to know how credit card cash advances work before you take one out. 

However, there are costs to taking a credit card cash advance and, in some cases, limits on the amount you can withdraw.

Here, Better Money Habits®asks Bank of America’s Jason Gaughan, SVP, Consumer Card Products, about the key considerations of a credit card cash advance.

Using your card for cash isn’t the only form of cash advance, though. Some credit card companies send customers checks in the mail. These “convenience checks,” as they are known, are linked to your account. If you deposit them, the transaction is considered a form of cash advance, which subjects you to the cash advance APR. You may also incur transaction fees.


1. How much money can you borrow with a cash advance on your credit card?
You can borrow whatever amount you choose.
You can borrow up to the limit of your credit card.
The amount that is transferred cannot exceed the current balance available on your credit card.
The amount that you must repay is added to your credit card balance.

2. What happens when you take out a cash advance?
The loan has no interest and does not need to be repaid.
The amount that is transferred is then deducted from your credit card balance.
You borrow money against your card's line of credit.
The amount you transfer cannot exceed the current balance of your bank account.


A cash advance is a loan offered by your credit card issuer. When you take out a cash advance, you're borrowing money against your card's line of credit. You must repay this loan and the amount you transfer cannot exceed the current balance available on your credit card. The amount that is transferred is then added to your credit card balance.

1. What term describes the process of taking out money from a bank or ATM using a credit card?
Refund
Withdrawal
Cash advance
Investment

2. When you use your credit card to take money out of a bank or ATM, what are you doing?
Taking a cash advance on your credit card
Making a deposit into your account
Paying with cash
Withdrawing money with a debit card

3. What are the potential costs of a cash advance?
No transaction fee
Transaction fee and a higher annual percentage rate (APR)
Lower annual percentage rate (APR)
No limit on how much you can get an advance on

4. What type of charge will you likely have to pay when using a cash advance?
A one time processing fee.
A lower interest rate than a debit card withdrawal.
A transaction fee and a higher APR.
No charge as it is accessing your own funds.

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