Credit cards are powerful financial tools, offering flexibility and convenience for everyday purchases. However, when you use your credit card to access cash advances, the 신용카드현금화 cost of borrowing is often far higher than standard transactions. To use this feature wisely, it’s important to understand how fees and interest work on credit card cash advances.
What Is a Credit Card Cash Advance?
A cash advance lets you withdraw physical cash using your credit card, either from an ATM, a bank teller, or by transferring funds into your checking account. Unlike regular purchases, cash advances are considered high-risk by lenders, which is why they come with additional costs and higher interest rates.
Common Fees on Cash Advances
When taking a cash advance, expect to pay multiple fees on top of your withdrawal amount.
Cash Advance Fee
This is usually 3–5% of the amount withdrawn or a flat fee (e.g., $10), whichever is greater. For example, if you withdraw $500, you may be charged $25 immediately.
ATM or Bank Fees
If you use an ATM, the machine may also charge an additional transaction fee. Bank tellers might impose a service fee as well.
Foreign Transaction Fees
If you withdraw cash abroad, some issuers also apply foreign transaction fees, which can be 2–3% of the withdrawal.
How Interest Works on Cash Advances
The biggest cost of a cash advance isn’t the upfront fee—it’s the interest.
Higher APRs
Cash advances typically have a higher annual percentage rate (APR) than regular purchases. For instance, while your card may have a 19% APR for purchases, the cash advance APR could be 25–29%.
No Grace Period
Unlike purchases, which may have a 20–30 day grace period before interest accrues, cash advances begin accruing interest immediately on the day of withdrawal. That means even if you pay your balance in full at the end of the month, you’ll still owe interest for each day the balance was outstanding.
Daily Compounding
Interest on cash advances is usually calculated daily. This means your balance grows faster compared to monthly compounding, especially if you don’t pay it off quickly.
Example of the True Cost
Imagine you withdraw $500 as a cash advance:
Cash advance fee: $25 (5%).
ATM fee: $3.
Interest rate: 25% APR, charged daily.
If you repay after 30 days, you could owe over $30 in interest, in addition to $28 in fees—making your total cost nearly $60 for just one transaction.
Tips to Minimize Costs
Borrow only what you need and repay as soon as possible.
Avoid ATMs with high fees—use in-network machines if possible.
Check your card terms for cash advance APRs and limits.
Consider alternatives, such as personal loans, overdraft protection, or tapping into savings.
Final Thoughts
Credit card cash advances are one of the most expensive forms of borrowing, mainly due to high fees, steep interest rates, and the absence of a grace period. Understanding exactly how fees and interest are applied can help you avoid unnecessary debt. If you must use a cash advance, treat it as a short-term solution and repay it quickly to minimize the financial impact.
