What is a Credit Card Cash Advance?

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What is a Credit Card Cash Advance
What is a Credit Card Cash Advance

What is a Credit Card? 

A credit card is a financial instrument that allows accessing a credit line quickly. Bank account holders can make cashless transactions using a credit card without deducting an amount from their cash deposits. Banks issue credit cards with a pre-set credit limit. It can be a digital asset also in this advanced technological world. The card issuer determines an individual’s eligibility to issue and sets a credit limit on the card. 

A credit card can be used easily to make purchases, unlike a debit card, when travelling in any foreign country. Also, credit cards offer better consumer protections against fraud than debit cards.

The card issuer charges interest if the user doesn’t pay off your full credit card bill before the grace period based on your applicable interest rate and outstanding balance. It varies by the type of credit card and the issuer. The issuer allows the users to pay within a grace period of 21 days without incurring interest if they pay the balance in full by the due date.

What is a Credit Card Cash Advance?

Financial services are getting advanced. Most individuals know that a credit card can be swiped in stores or used to make online payments, but few know that a credit card can also be used to withdraw cash. Credit cards are issued with the cash advance feature also.

A credit card cash advance is a short-term instant loan offered by credit card issuers to the credit cardholder. Credit cardholders can withdraw money through cash advance in a few different ways:

  • At an ATM: The credit card user can go to an ATM and withdraw cash against the cash advance reserve using your ATM PIN. If you don’t have a PIN, it can be generated using the ATM. The card issuers put a limit on the withdrawable amount from an ATM.
  • In-person: One can simply visit your bank’s nearest branch for a withdrawal by requesting a cash advance against the credit card.
  • Convenience check: Credit cards also offer a withdrawal facility through convenience checks. The cardholder can write a check to himself and then cash it.

Understand Cash Advance Fee to Lower Down it

Undoubtedly, a cash advance is a quick way to get cash. It is also necessary to know the fees charged on cash advances. It can outweigh the benefits of cash advances if the incurred fee is hefty. Here are the important aspects regarding what is a credit card cash advance that a card user should know:

  • Cash advance APR: Often, credit card cash advances carry a higher interest rate than purchases using credit cards. You can find a credit card with 0% interest in cash advances as the introductory offer. After the stipulated period, say six months, the card issuer will charge the APR accordingly.
  • Cash advance fee: There is a fee for using a credit card cash advance facility. The fee can be between 3% to 5% of each cash advance requested. 
  • ATM or bank fee: When the credit card is used for a cash advance at an ATM or a bank branch, the issuer charges a separate fee for taking out a cash advance.
  • No grace period: Credit card users can not enjoy the benefit of a grace period for cash advances. You need to pay the interest starting from the day you withdraw money against the cash advance facility. There is no grace period of 21 days like a credit purchase. This charge is different from making a purchase using your credit card. 
  • Separate credit limit: The issuer sets a separate limit on cash advances. It is a portion of your overall credit card limit. For example, if the credit card limit is Rs.70,000 per month, the issuer may set a limit of Rs.20,000 to take cash advances.

If an individual makes several cash advance transactions within a day, the bank will charge for each transaction independently. It would be wise to check the applied charges on a credit card to avoid unmanageable debts. After withdrawing cash, these charges appear on the subsequent credit card bill statement. 

You can find a credit card issuer that does not charge any interest on credit card cash withdrawal for a few days. It will help you save your funds for emergencies.

Does cash advance impact your credit score?

Credit card bureaus do not access credit card cash advances separately. The total amount owed by an individual gets recorded as a whole. Thus, credit card cash advances do not hurt an individual’s credit record separately. It can be expensive to pay only the minimum of your interest for cash advances (accrued every day). It is always best to pay the bill as much as possible, ideally, in full to avoid any harm to your credit score. 

Conclusion

Thus, a credit card cash advance is a tempting option to avoid short-term financial crunches. If you use it prudently without an act following expensive consequences, like delayed payments, cash from a credit card is a simple transaction.

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