credit card cash advance
Borrowing cash against a credit card limit — carries immediate interest with no grace period and higher APR than purchases.
Example
“The credit card cash advance at 27% APR with a 5% fee was far more expensive than a personal loan.”
Memory Tip
CASH ADVANCE — avoid it. High fee, high rate, no grace period. One of the worst ways to borrow.
Why It Matters
Credit card cash advances are important to understand because they are significantly more expensive than regular credit card purchases. Knowing the costs involved helps you avoid unnecessary debt and make better decisions about where to borrow money when you need cash.
Common Misconception
Many people think that cash advances work the same as regular credit card purchases and have a grace period before interest starts accumulating. In reality, cash advances begin charging interest immediately with no grace period, making them much costlier right from the start.
In Practice
If you withdraw 500 dollars from an ATM using your credit card with a cash advance APR of 25 percent, you will owe 10.42 dollars in interest after just one month, compared to zero dollars for a regular purchase with a grace period. Over a year, that same 500 dollar cash advance would cost you over 65 dollars in interest alone, assuming you made no payments.
Etymology
Modern credit card feature — but one of the most expensive ways to borrow.
Common Misspellings
Check your credit score free — no impact
Related Terms
More in credit
Other credit terms you should know
See Also
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