Nearly one in four Americans don’t have an emergency fund, according to Bankrate. If you’re among those without enough cash on hand to cover an unexpected expense, you may be tempted to use a credit card cash advance as a quick solution. But you’ll pay for the convenience in high interest and fees.
A cash advance is a short-term loan from your card issuer, allowing you to borrow against your card’s credit limit, with no collateral required. You can typically get the cash at an ATM or a local bank branch. How much you can withdraw depends on your card issuer’s rules. Cash advances may be capped at a few hundred dollars or about 30% of your card’s credit limit.
You’ll pay an up-front fee, usually the greater of about $10 or 3% to 6% of the transaction amount. Interest accrues immediately; there’s no interest-free grace period, which most credit cards offer on standard purchases. And the cash-advance interest rate — often in the range of 25% to 30% — is usually higher than the rate that applies to purchases, says credit expert Gerri Detweiler.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Alternatives to a credit card cash advance
Not only do cash advances hit your wallet, they can also hurt your credit score. When you take out a cash advance, the unpaid balance counts toward your credit-utilization ratio — the percentage of available credit that you’re using on your credit card. If your utilization ratio rises because of the cash advance, your credit score may drop.
As an alternative to a cash advance, try asking your bank or credit union for a low-cost loan to help cover emergency costs, Detweiler suggests.
Another option: Open a credit card with a 0% introductory rate on purchases. The Wells Fargo Reflect card, for example, charges no interest for 21 months.
But if you take this route, be sure to pay off the balance before the 0% window closes. After that, you’ll likely owe double-digit interest on any remaining balance.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related content
-
A New TSA Fee Is Coming for Travelers With No REAL IDDon't have a REAL ID yet? You might get hit with a fee to go through security at the airport.
-
Dow Soars 493 Points in Fed-Fueled Bounce: Stock Market TodayNew York Fed President John Williams struck a dovish tone Friday, which eased Wall Street's worries over a potential December pause.
-
A New $18 TSA Fee Is Coming Soon: What to Know
Don't have a REAL ID yet? You might get hit with a fee to go through security at the airport.
-
How to Skip Fees at the BankYou can steer clear of fees, especially if you choose your account wisely. Here are some tips to keep them at bay.
-
Insurance Buyer Beware: States Are Lowering the Bar for Agents and BrokersA new California law removes 20 hours of required education before an aspiring agent can take tests to get licensed. They can then get licensed in other states.
-
Amazon Haul Gift Guide: Under-$20 Gifts That Keep Your Holiday Budget in TactFrom stocking stuffers to budget-friendly crowd pleasers, these are the best under-$20 gifts on Amazon Haul right now.
-
When Helping Mom and Dad Hurts Your WalletNew research shows how assisting an aging parent with expenses can strain your own finances.
-
6 Quick Money Moves to Make Before the Year EndsFinish the year strong with smart money moves that can boost savings, trim taxes and set you up for a better 2026.
-
Want to Change Banks? Try This 'Soft' StrategyThe "soft switching" banking trend allows you to explore a new bank account while keeping your primary one. See how it could benefit you.
-
I'm an Attorney and a CPA: Charitable Giving Just Got a Little Easier, But Also a Little HarderThe OBBB shakes up charitable deductions with a little help for non-itemizers and a new challenge for itemizers this holiday season.
