How to Get a Cash Advance with a Credit Card

Cash is king – especially if you are in a bind and need access to it quickly. If you have a credit card, you may need to use what is known as a cash advance. But, take some time to think before you withdraw that money.

We hope this article will help you understand this transaction’s true nature before you get a cash advance with a credit card.

A credit card cash advance allows you to borrow money from your card issuer by withdrawing money directly from an ATM. Outside of ATMs, balance transfers, money orders and credit card cheques are also considered cash advances.

Admittedly, the cash advance provides convenience to the user as you can get the money instantly, and on rare occasions, it may be less expensive than options like payday loans. But, other than that, this can be rather costly if done regularly.

That cost is hardly discussed in detail, and the following section will give you a look into the true cost of using a cash advance.

Many may equate getting a cash advance from a credit card to withdrawing your money from a debit card, but there are some distinct costs unique to the cash advance that truly highlight its nature.

When looking at the true costs of the cash advance, please consider the following:

Compared to the traditional credit card, interest on a credit card cash advance is accrued almost immediately after you have made the transaction. Therefore, the interest is higher than the usual interest on a credit card.

The average credit card will charge 19.99% on any interest carried over from period to period. Interest rates on cash advances can get to 22.99% or sometimes higher.

While each credit card issuer differs, the idea of additional fees remains the same. Credit card cash advance fees can be calculated based on a fixed amount per cash advance or a percentage of your transaction. Also, keep in mind that ATMs can sometimes have additional fees too!

Cash advances do not offer a grace period (typically 21 days) in which you will not be charged additional interest if you pay your balance on the due date. With the cash advance, you will be charged interest from the transaction date until you pay off your balance in full.

We are all about leveraging credit cards to earn rewards for everyday shopping. When you use cash advances, you actually hurt your ability to get some serious reward points. Cash advances are not counted towards any of the benefits rewards programs offer. 

Cash advances are rarely advised as a viable option. In fact, the only time to use them is when you have truly exhausted all of your options.

Here are a few ideas you can use before using the cash advance option:

Leave it to family and friends to help you during hard times. While everyone’s situation may be different, it doesn’t hurt to ask family members and close friends for some cash as a private loan.

In this case, you will decide on the terms and conditions of the loan, which may be very generous if it is from a family member or close friend. Repaying them should be a top priority.

Emergency funds are appropriately named as they help you cover unexpected expenses during an emergency. Think of it as your first line of defence before considering using debt to bail you out of a situation. 3-6 months of expenses is a general rule of thumb, and once you use it, you can constantly replenish it – interest-free!

Before taking a cash advance, you may also benefit from a less expensive option known as a line of credit. This is another form of credit that can be borrowed for whatever you wish. The good part about it is that the interest rate is nowhere near the cash advance rate, making it a more attractive option.

An overdraft allows you to access more money than you have in your account. Let’s say you had overdraft protection of $300. If you needed to purchase something that cost $50 and only had $25, this would put your account at -$25 but help you avoid Non-sufficient fund fees. A monthly fee comes with having an overdraft, but again, it is a safer option than cash advances.

Accessing long-term investments is another option you can use if you are financially burdened. Before considering using a cash advance, you may be better off accessing the cash in investment vehicles like the RRSP or TFSA, as it will give you access to your money. However, this may come with penalties that you should talk to a financial advisor about before immediately taking money from your account.

Now that you know what a cash advance is, you may still be tempted to use it for personal matters. If you use it, you may as well find some options with the least amount of financial damage. Here are three excellent credit card options with low cash advance fees:

The BMO Preferred Rate Mastercard^®* certainly holds its own as a low-interest cash advance credit card. Outside of the 15.99% cash advance rate, the card also boasts a 12.99% rate on all balance transfers.

The current offer includes a 0.99% introductory interest rate on balance transfers for nine months with a 2% transfer fee, and BMO will waive the $20 annual fee for the first year. This includes a basic extended warranty and purchase protection coverage.  One aspect to consider with this card is a $5.00 fee for each cash advance. You also won’t be eligible to earn any reward points.

Another low-interest credit card for cash advances is the Scotiabank Value^® Visa* Card. The card currently offers a 0.00% introductory interest rate on Cash Advances for the first six months (12.99% after that; annual fee $29).

Plus no annual fee in the first year until August 31st, 2022. While it is promoted as a card to help you save on interest, the downside to this card is that it does not earn cash back or reward points.

Last but not least, we have the National Bank Syncro Mastercard. While the card has a higher annual fee than the two previously mentioned cards ($35), it has value in its low cash advance rate, 1-year extended warranty and 90-day purchase protection. This is a relatively simple credit card, but it may be helpful if you consider using the cash advance option.

Getting a cash advance from a credit card is costly and could hurt you financially in more ways than one. Therefore, they should be avoided unless it is a last resort, but it is your call to use this option.

At least you are informed and can make an educated decision on whether or not this is for you. If you have to use a cash advance, it could signal a more significant financial problem requiring budgeting and financial discipline. Don’t be afraid to speak to a professional; seek help when you can!