A credit card is by far the most used financial tool when it comes to purchasing products. Responsible usage helps build an excellent credit score, making loan approvals much easier.

Easy monthly installments and extra security against fraud are some of its benefits. But, let’s not forget about cash advances.

A cash advance is one of the fastest and surefire ways of getting instant cash, but it comes with some drawbacks. In this article, we dive into what cash advance offers.

From cash advance limits to fees and interests, get to know more and see if it works for you.

How Does Cash Advance Work?

A cash advance is like a small and fast loan. It can be withdrawn instantly, but for a usually high fee.

Getting cash advance via credit card is as simple as withdrawing from an ATM. Here are the most common ways to get cash advance:

  1. ATM
  2. Issuing Bank
  3. Online Banking
  4. Convenience Check

What Is a Cash Advance Limit?

Like a credit card limit, there is also a cash advance limit. The cash advance limit is set to the maximum allowable withdrawal money.

It is typically a smaller amount than the credit card limit since it is computed as a percentage of it. After making a cash advance, expect the interest to be charged without a grace period.

What Fees Can I Expect?

Using a cash advance comes with several fees and high interests charged to your account. The fees may vary per bank, but it is usually between 3% to 5% of the amount borrowed.

For instance, the Citibank Cash Advance fee is 5%, whereas the Bank of America Cash Advance fee is 4%. Moreover, it will have a withdrawal fee and higher interest rates than credit cards.

If you withdraw from an ATM or bank, you may be charged a withdrawal fee as well.

What Are the Pros and Cons?

If you need money fast, then a cash advance is the way to go, especially for emergencies. On top of that, there’s no need for an application or approval since you can easily withdraw the money from any ATM.

Yet, expect to pay high fees and interest rates without a grace period. This financial service is only available to credit card users for a smaller withdrawable amount.

Is Cash Advance for You?

Fast cash may be tempting, but it’s best to use a cash advance for emergencies only. If you’re not in a hurry but still need cash, you can opt for a low-interest loan with lower interest rates.

Although it doesn’t affect your credit score, the total balance on your credit card can. Thus, it’s best to pay the cash advance debt before your credit card bill arrives.

So before making drastic cash advances, take the time to find other alternatives. Try borrowing from friends or family or using your emergency funds instead.

Lastly, before applying for a credit card, always compare each bank’s terms and conditions to see which offers the best rates.