Does a Cash Advance Hurt Your Credit?
Many people wonder if taking a cash advance will damage their credit score. The truth is that a cash advance itself does not directly hurt your credit score, but how you manage the repayment can affect it.
Cash advances typically come with high fees and interest rates, which may lead to financial strain if not handled carefully. This strain can increase the risk of missed payments, which do negatively impact credit.
Understanding the indirect effects of cash advances on credit helps readers make smarter financial decisions. This article breaks down these details to clarify the real impact on credit health.
What Is a Cash Advance?
A cash advance allows cardholders to access cash quickly, often through an ATM or bank. It involves borrowing money against a credit card’s available limit with specific fees and interest rates that differ from standard purchases.
This service is available on many credit cards, including some of the easiest credit cards to get in 2025 and popular options on the best credit cards of May 2025 list.
Types of Cash Advances
There are two common types of cash advances: ATM withdrawals and convenience checks. ATM withdrawals let cardholders use their credit card like a debit card to get cash immediately. Fees usually include a percentage of the amount withdrawn or a flat fee.
Convenience checks are issued by credit card companies for cash access, acting like personal checks but drawn against the credit limit. Both types charge higher interest rates than regular purchases. Some cards, including many easy-to-get credit cards, impose daily or monthly limits on cash advances.
How Cash Advances Work
Cash advances start accruing interest from the day the cash is withdrawn, unlike purchases that often have a grace period. Interest rates for cash advances are generally higher, sometimes 5-10% more than the card’s standard APR.
There are also upfront fees, commonly 3% to 5% of the cash amount, with minimum charges ranging between $5 and $10. This combination of fees and interest makes cash advances an expensive borrowing method.
Using a cash advance may impact credit usage ratios, which could influence credit scores if usage is high or payments are missed. Cards listed among the best credit cards of May 2025 typically provide clear terms on cash advance fees and limits to help users avoid surprises.
How a Cash Advance Can Affect Your Credit
Taking a cash advance can impact credit in specific ways, including changes in credit utilization, effects on credit scoring factors, and how the activity is reported to credit bureaus. These elements influence creditworthiness and borrowing capacity.
Credit Utilization and Cash Advances
A cash advance immediately increases the balance on a credit card, which raises credit utilization. Utilization is the percentage of available credit a borrower uses, and it is a significant factor in credit scores.
For example, if someone has a $5,000 credit limit and takes a $500 cash advance, their utilization jumps by 10%. Given that the average credit card interest rate in America today is about 20%, carrying a higher balance can lead to quickly increasing debt.
High utilization can lower credit scores or keep them from rising, particularly if the person is aiming to improve their score quickly or meet thresholds needed for purchases, like a car loan that often requires a credit score of at least 660.
Credit Score Factors Impacted
Cash advances primarily affect two credit score components: credit utilization and payment history.
Payment history can suffer if the borrower struggles to repay the cash advance and related fees or interest. Since cash advances often come with higher interest rates and no grace period, balances grow fast, increasing the chance of missed payments.
Debt levels can also increase perceived credit risk. Unlike regular purchases, cash advances usually carry fees and higher APRs, impacting monthly payments and making timely repayment harder.
Reporting Cash Advance Activity
Credit card issuers report cash advance balances and payments the same way they report normal purchases. The balance shows up on credit reports, directly impacting credit utilization.
Cash advances do not have a separate indicator on credit reports; they appear as part of the overall card balance. Late payments related to cash advances affect credit negatively, just like standard credit card debt.
Understanding how cash advances appear on credit reports helps borrowers manage their strategy, especially those trying to raise their credit score materially within a short time or planning major purchases.
Short-Term vs. Long-Term Credit Impact
A cash advance affects credit reports differently in the short term versus the long term. Immediate changes are often tied to increased credit utilization and new credit inquiries, while lasting impacts depend on repayment behavior and account management over time.
Immediate Effects on Credit Report
When a cash advance is taken, credit card balances typically rise sharply. This increase in utilization can lower the credit score, especially if it pushes utilization above 30%. The credit report will show a new balance that reflects the cash advance.
Additionally, a cash advance may trigger a hard inquiry if the user applies for a new credit card to facilitate the advance. Hard inquiries can reduce the credit score by a few points for up to 12 months.
The immediate impact is mostly due to higher debt levels and credit inquiries, not the cash advance itself. If the user consolidates cash advance debts with other loans, those accounts could reflect differently based on the credit product type.
Long-Term Consequences
Long-term effects depend heavily on repayment timeliness. If the balance from the cash advance is paid off quickly, any negative impact diminishes within a few months. Persistent high balances, however, continue to harm the credit score by maintaining a high utilization rate.
Chronic reliance on cash advances can also signal financial distress to lenders. Late payments or defaults related to cash advance debts will lower the score and remain on the credit report for up to seven years.
Debt consolidation may improve the credit score over time by reducing revolving debt and creating fixed monthly payments. This structured approach supports credit management and stability, which can positively influence long-term credit health.
Cash Advance Fees and Interest Rates
Cash advances usually come with high fees and steep interest rates, making them costly compared to regular credit card purchases. Understanding these charges helps consumers make smarter decisions about using cash advances and managing debt.
Typical Fees Charged
Most credit cards charge a cash advance fee between 3% and 5% of the amount withdrawn. Some cards have a flat fee, typically around $10 to $15 per transaction. For example, withdrawing $200 might cost a fee of $6 to $10 at 3-5%.
In addition, many cards charge ATM operator fees on top of the card issuer’s fee. These extra charges increase the total cost of the cash advance.
Cards listed among the Best Credit Cards of May 2025 often have varying fee structures. Some offer lower cash advance fees, but very few waive them entirely due to the risk involved with quick cash lending.
How Interest Is Calculated
Interest on cash advances usually starts accruing immediately, with no grace period like that on purchases. The rates are typically higher than for normal credit card spending.
The average credit card interest rate in America today is around 19% APR, but for cash advances, rates often range from 25% to 30% APR. This means that carrying a cash advance balance can be expensive if not paid quickly.
Interest is calculated daily based on the outstanding cash advance balance, compounding over time. This method increases the total cost the longer the balance remains unpaid, unlike purchases that might allow interest-free periods.
Alternative Ways to Access Cash
Accessing cash without a cash advance can be more cost-effective and less damaging to credit. Options like personal loans and balance transfers often provide lower interest rates and better repayment terms, making them viable choices for managing urgent cash needs.
Personal Loans vs. Cash Advances
Personal loans generally offer fixed interest rates and longer repayment periods compared to cash advances, which come with high fees and interest accruing immediately. Borrowers with good credit who qualify for personal loans can secure amounts up to $10,000 or more, often with the help of a cosigner to improve approval chances and interest rates.
Key points about personal loans:
- Typically lower interest rates than cash advances
- Fixed monthly payments and set terms
- Can impact credit score positively if managed well
- Best personal loans with a cosigner can reduce costs for those with lower credit scores
Balance Transfers as an Alternative
Balance transfers allow moving existing credit card debt to a new card with low or 0% introductory APR, effectively providing interest-free access to funds if used wisely. Some balance transfer offers extend 12 to 18 months of no interest, which can be an affordable option compared to cash advances.
Important factors about balance transfers:
- Usually have a transfer fee of 3-5% of the amount moved
- Requires good credit to qualify for best balance transfer cards
- Helps avoid high cash advance fees and immediate interest
- Can help consolidate debt but does not provide new cash directly
Both options demand careful budget planning to avoid future credit damage.
How to Minimize Negative Credit Impact
Managing cash advances carefully can reduce their potential harm to credit scores. Quick repayment and careful credit monitoring are essential steps. These actions help maintain a healthier credit profile while addressing high-interest debt.
Paying Off Cash Advances Quickly
Cash advances carry high interest rates and often start accruing immediately. The best way to limit their impact is to pay them off as soon as possible. This reduces ongoing interest and lowers credit utilization, both of which affect credit scores.
Debt consolidation is a strategy to consider if multiple cash advances or debts accumulate. Consolidating with a lower-interest loan or credit card can prevent further credit score damage by simplifying payments and potentially lowering utilization. However, it’s important to choose consolidation options that do not involve new hard credit inquiries or high fees.
Timely payments of cash advances showcase responsible credit behavior. This timely repayment can prevent account delinquency, which significantly hurts credit scores. Avoid minimum payments alone to minimize carrying high balances.
Monitoring Your Credit Report
Regularly checking credit reports helps identify how cash advances and other debts affect credit standing. Consumers can dispute errors such as incorrect balances or late payments that falsely lower scores.
Free credit report services allow checks at least once a year from the main credit bureaus. Monitoring also provides insight into credit utilization patterns and payment history trends that influence credit scores.
Keeping an eye on changes makes it easier to respond quickly to any issues before they worsen. For those aiming to raise their credit score significantly in a short time, such as by 100 points in 30 days, close credit monitoring is crucial. It enables strategic steps like correcting errors, reducing balances, and optimizing credit use.
When Using a Cash Advance Makes Sense
Cash advances can be costly, but there are specific scenarios where they provide practical value. Understanding when the urgency outweighs the fees and interest is vital. Balancing immediate financial need with longer-term credit impact helps in making informed decisions.
Emergency Financial Situations
A cash advance is often useful in urgent scenarios where no other quick funds are available. Examples include paying a medical bill unexpectedly or covering urgent car repairs that can’t wait. In these cases, having immediate access to cash can prevent more severe consequences.
Using a cash advance as a last resort is key, since the interest rates and fees are higher than typical credit card use. It is not advisable for planned expenses or minor cash needs, especially when options like quick side jobs or simple ways to make $100 fast might provide alternatives. Emergency use justifies the cost when no lower-cost option is possible.
Weighing Risks and Benefits
Before taking a cash advance, it is important to weigh the interest rates, fees, and potential credit impact against the immediate need. Paying off the advance quickly minimizes interest charges, helping to limit damage to credit.
Considering lower-cost alternatives, such as short-term loans or exploring passive income ideas to boost cash flow in 2025, can reduce reliance on cash advances. The key is knowing the true cost and managing repayment promptly to avoid long-term financial strain.
Other Factors That Can Affect Your Credit Score
Several financial choices beyond cash advances influence credit scores. Understanding how specific actions impact credit can help individuals manage their credit health more effectively.
Debt Consolidation Loans
Debt consolidation loans combine multiple debts into a single loan, often with a lower interest rate. When used correctly, they can simplify payments and reduce overall interest costs.
However, applying for a debt consolidation loan initiates a hard inquiry, which might temporarily lower the credit score by a few points. Opening a new loan account also increases available credit but adds to total debt, affecting credit utilization rates.
Timely payments on the consolidation loan are crucial. Missing payments can damage credit scores more than the initial inquiry. Careful planning helps avoid unnecessary credit damage while benefiting from consolidated debt management.
Credit Card Utilization
Credit utilization measures the percentage of available credit being used. It is a major factor in credit scoring, often accounting for up to 30% of the score.
Keeping utilization below 30% is generally recommended for maintaining a good credit score. High utilization signals risk to lenders and can significantly lower credit scores.
It is important to monitor both individual card utilization and total credit utilization across all cards. Paying down balances before the statement closing date can reduce reported utilization and benefit scores.
Missed Payments
Payment history is the single most critical factor in credit scoring models, representing about 35% of the score.
Even one missed payment can cause a significant drop in credit score. The impact depends on how late the payment is; payments 30 days late can hurt, while those 60 or 90 days late cause greater damage.
Repeated missed payments or defaults signal high risk to lenders. Maintaining on-time payments helps preserve or improve credit scores over time.
Frequently Overlooked Costs of Cash Advances
Cash advances come with expenses beyond interest rates and repayment terms. These hidden costs can significantly increase the amount owed within a short period. Two key fees often missed are foreign transaction fees and ATM fees.
Foreign Transaction Fees
Foreign transaction fees apply when a cash advance is taken in a currency other than the cardholder’s home currency. Typically, this fee ranges from 1% to 3% of the transaction amount.
Card issuers calculate this fee by converting the foreign currency to U.S. dollars based on daily exchange rates. It is important to note these fees are charged on top of any cash advance fees and interest that begin accruing immediately.
Travelers rely on cash advances abroad often underestimate this cost. For example, a $200 cash advance may have a $4 to $6 foreign transaction fee added, making the overall expense higher than expected.
ATM Fees
ATM fees occur when using an out-of-network machine for a cash advance. The cardholder’s bank typically charges a withdrawal fee, often $2 to $5. Additionally, the ATM owner may add a surcharge, which can be $3 to $7 or more.
These fees are separate from the cash advance interest and processing charges. They add to the total cost and can make small cash advances disproportionately expensive.
Using ATMs associated with the card issuer can help minimize fees. Otherwise, frequent cash advances through ATMs increase the chances of incurring multiple fees quickly.
