{"id":14657,"date":"2024-02-06T13:30:14","date_gmt":"2024-02-06T19:30:14","guid":{"rendered":"https:\/\/www.lexingtonlaw.com\/blog\/?p=14657"},"modified":"2025-06-06T10:00:22","modified_gmt":"2025-06-06T16:00:22","slug":"what-is-a-cash-advance","status":"publish","type":"post","link":"https:\/\/www.lexingtonlaw.com\/blog\/credit-101\/what-is-a-cash-advance.html","title":{"rendered":"What is a cash advance and how does it work?"},"content":{"rendered":"\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"570\" height=\"190\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2022\/08\/cash-advance-hero-1500x500-1.jpg\" alt=\"\" class=\"wp-image-18821\"\/><\/figure>\n\n\n\n<p class=\"has-white-color has-text-color has-background has-link-color wp-elements-a319f07f7a5cfea66f022559b2e65d56\" style=\"background-color:#00204f\">A cash advance is an unsecured loan that lets you borrow money against your credit limit. Merchant cash advances and payday loans work similarly.<\/p>\n\n\n\n<p><em>The information provided on this website does not, and is not intended to, act as legal, financial or credit advice. <\/em><a aria-label=\"undefined (opens in a new tab)\" href=\"https:\/\/www.lexingtonlaw.com\/disclaimer\" target=\"_blank\" rel=\"noreferrer noopener\"><em>See Lexington Law\u2019s editorial disclosure for more information.<\/em><\/a><\/p>\n\n\n\n<p>Cash advances are unsecured loans that let you borrow money against your credit limit. If you\u2019re in a situation where you need cash fast but don\u2019t have enough funds in your checking account, a cash advance can be helpful. However, cash advances often come with fees and specific restrictions.<\/p>\n\n\n\n<p>If you\u2019re wondering \u201cwhat is a cash advance,\u201d we\u2019ll explain how this loan works and break down the pros, cons and fees that come with it. We\u2019ll also cover how Lexington Law Firm could help you improve your credit after taking out a loan.<\/p>\n\n\n\n<p><strong>Table of contents:<\/strong><\/p>\n\n\n\n<ul>\n<li><a href=\"#what-is-a-cash-advance\">What is a cash advance?<\/a><\/li>\n\n\n\n<li><a href=\"#how-does-a-cash-advance-work\">How does a cash advance work?<\/a><\/li>\n\n\n\n<li><a href=\"#how-to-get-a-cash-advance\">How to get a cash advance<\/a><\/li>\n\n\n\n<li><a href=\"#are-cash-advances-expensive\">Are cash advances expensive?<\/a><\/li>\n\n\n\n<li><a href=\"#types-of-cash-advances\">Types of cash advances<\/a><\/li>\n\n\n\n<li><a href=\"#can-cash-advances-hurt-your-credit\">Can cash advances hurt your credit?<\/a><\/li>\n\n\n\n<li><a href=\"#pros-and-cons-of-cash-advances\">Pros and cons of cash advances<\/a><\/li>\n\n\n\n<li><a href=\"#less-expensive-cash-advance-alternatives\">Less expensive cash advance alternatives<\/a><\/li>\n\n\n\n<li><a href=\"#address-credit-reporting-errors-with-lexington-law-firm\">Address credit reporting errors with Lexington Law Firm<\/a><\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"what-is-a-cash-advance\"><a id=\"_tkr0z0cmj536\"><\/a>What is a cash advance?<\/h2>\n\n\n\n<p>A cash advance is an unsecured short-term loan from a lender, such as a bank or financial institution. With <a href=\"https:\/\/www.lexingtonlaw.com\/blog\/finance\/unsecured-debt.html\" target=\"_blank\" rel=\"noreferrer noopener\">unsecured debt<\/a>, you don\u2019t have to offer collateral to access funds. However, unsecured loans typically have higher interest rates, repayment terms and transaction fees\u2014all of which apply to cash advances.<\/p>\n\n\n\n<p>Depending on your credit, your history with a bank and the amount you borrow, your fees and interest rates for cash advances can vary.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-does-a-cash-advance-work\"><a id=\"_s046i6rweo2u\"><\/a>How does a cash advance work?<\/h2>\n\n\n\n<p>Banks, credit unions and payday loan companies all offer cash advances. These companies make money by providing you with a loan and then charging fees and interest for the service. When you receive the loan, you\u2019ll also receive terms that outline items such as fees, interest and the repayment period for your loan.<\/p>\n\n\n\n<p>The money you can borrow with a cash advance is based on a percentage\u2014typically 20 \u2013 30 percent of your credit limit. For instance, if you have a $1,000 credit limit, you\u2019ll likely be able to borrow up to $200 or $300.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"how-to-get-a-cash-advance\"><a id=\"_39krzyp7t36e\"><\/a>How to get a cash advance<\/h2>\n\n\n\n<p>Essentially, a cash advance allows a credit card to be used as a debit card. But unlike a debit card, which gives you access to money that is already yours, you have to pay back the money from a cash advance.<\/p>\n\n\n\n<p>Here are four ways you can get a cash advance:<\/p>\n\n\n\n<ul>\n<li>Request a cash access check delivered via mail<\/li>\n\n\n\n<li>Go to a merchant or payday loan company<\/li>\n\n\n\n<li>Use your PIN at an ATM<\/li>\n\n\n\n<li>Visit a bank or credit union<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"1032\" height=\"1068\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-30.png\" alt=\"\" class=\"wp-image-20223\" srcset=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-30.png 1032w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-30-768x795.png 768w\" sizes=\"(min-width: 767px) 600px, calc(100vw - 35px)\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"are-cash-advances-expensive\"><a id=\"_himn7lj6s4b7\"><\/a>Are cash advances expensive?<\/h2>\n\n\n\n<p>Cash advances can be more expensive than other types of loans, like <a href=\"https:\/\/www.lexingtonlaw.com\/bad-credit\/personal-loans\" target=\"_blank\" rel=\"noreferrer noopener\">personal loans<\/a>. The trade-off is that cash advances are often quicker to acquire than if you go through another loan application process. The following are some terms and fees to keep in mind:<\/p>\n\n\n\n<ul>\n<li><strong>Cash advance APR: <\/strong>The interest rate on a credit card cash advance in 2024 can range from <a href=\"https:\/\/www.forbes.com\/advisor\/credit-cards\/what-is-a-cash-advance-and-should-you-get-one\/#:~:text=For%20most%20credit%20cards%2C%20the,different%20types%20of%20cash%20advances.\" target=\"_blank\" rel=\"noreferrer noopener\">17.99 to 29.99 percent<\/a>, according to Forbes.<\/li>\n\n\n\n<li><strong>Cash advance fees:<\/strong> Fees will range from 3 to 5 percent of the total amount withdrawn or $5 to $10, whichever is greater. To learn more about your credit card issuer\u2019s fees, check your online credit card account or your cardholder agreement terms.<\/li>\n\n\n\n<li><strong>ATM or bank fee: <\/strong>Most ATMs or banks will charge a fee for their services.<\/li>\n\n\n\n<li><strong>No grace period:<\/strong> Unlike other loans, there\u2019s no <a href=\"https:\/\/www.lexingtonlaw.com\/blog\/credit-cards\/credit-card-grace-period.html\" target=\"_blank\" rel=\"noreferrer noopener\">grace period<\/a> for cash advances. This means you\u2019ll start accruing interest as soon as you take the loan.<\/li>\n\n\n\n<li><strong>Separate credit limit: <\/strong>Your cash advance limit will differ from your credit limit.<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"1071\" height=\"475\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-29.png\" alt=\"\" class=\"wp-image-20222\" srcset=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-29.png 1071w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-29-768x341.png 768w\" sizes=\"(min-width: 767px) 600px, calc(100vw - 35px)\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"types-of-cash-advances\"><a id=\"_qon54qqomoro\"><\/a>Types of cash advances<\/h2>\n\n\n\n<p>There are a few different types of cash advances that each function differently and have unique fees.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-credit-card-cash-advances\"><a><\/a>Credit card cash advances<\/h3>\n\n\n\n<p>This type of cash advance uses your line of credit to provide you with money you\u2019ll pay back through regular payments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-merchant-cash-advances\"><a><\/a>Merchant cash advances<\/h3>\n\n\n\n<p>Merchant cash advances provide a lump sum of money in exchange for a percentage of a borrower\u2019s future sales. This type of cash normally becomes available after a company has established a strong rapport with a financial institution.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\" id=\"h-payday-loans\"><a><\/a>Payday loans<\/h3>\n\n\n\n<p>Certain companies offer payday loans that give borrowers fast access to cash. Payday loans often have very brief repayment periods, and their payout amounts depend on your state\u2019s laws. In California, for example, payday loans cap out at $300, and lenders are only allowed to charge 15 percent of the amount (about $45) as a fee.<\/p>\n\n\n\n<p><a href=\"https:\/\/www.lexingtonlaw.com\/education\/are-payday-loans-bad\" target=\"_blank\" rel=\"noreferrer noopener\">Are payday loans bad?<\/a> Not necessarily, though payday loan companies often charge the highest fees and interest rates. It might be wise to use this option as a last resort.<\/p>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"1092\" height=\"1250\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-28.png\" alt=\"\" class=\"wp-image-20221\" srcset=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-28.png 1092w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-28-768x879.png 768w\" sizes=\"(min-width: 767px) 600px, calc(100vw - 35px)\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"can-cash-advances-hurt-your-credit\"><a id=\"_36qtwtqvfcs4\"><\/a>Can cash advances hurt your credit?<\/h2>\n\n\n\n<p>The act of taking out a cash advance doesn\u2019t directly impact your credit. However, it may indirectly affect your credit in two different ways.<\/p>\n\n\n\n<p>First, it can raise your <a href=\"https:\/\/www.lexingtonlaw.com\/credit\/credit-utilization\" target=\"_blank\" rel=\"noreferrer noopener\">credit utilization<\/a> rate\u2014which is best kept at or below 30 percent credit utilization. If your cash advance causes your utilization rate to rise above that threshold, you may see a negative change in your credit profile.<\/p>\n\n\n\n<p>Second, the high fees and interest rates may affect your ability to make on-time payments. A missed or <a href=\"https:\/\/www.lexingtonlaw.com\/credit-repair\/late-payments\" target=\"_blank\" rel=\"noreferrer noopener\">late payment<\/a> will negatively affect your credit, so always make sure you have a repayment plan whenever you take out an advance. These loans are also sent to collections if they aren\u2019t paid, which can negatively impact your credit as well.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"pros-and-cons-of-cash-advances\"><a id=\"_j4xzavgdcr9l\"><\/a>Pros and cons of cash advances<\/h2>\n\n\n\n<p>As with all types of loans, there are pros and cons to cash advances. Some of the most common advantages and disadvantages include the following points.<\/p>\n\n\n\n<p>Pros:<\/p>\n\n\n\n<ul>\n<li>Streamlined application process<\/li>\n\n\n\n<li>Fast approval time<\/li>\n\n\n\n<li>Useful in case of an emergency<\/li>\n<\/ul>\n\n\n\n<p>Cons:<\/p>\n\n\n\n<ul>\n<li>Higher than average interest rates<\/li>\n\n\n\n<li>Often come with many fees for transactions<\/li>\n\n\n\n<li>No grace period for repayments<\/li>\n<\/ul>\n\n\n\n<figure class=\"wp-block-image size-full\"><img decoding=\"async\" width=\"1073\" height=\"1079\" src=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-27.png\" alt=\"\" class=\"wp-image-20220\" srcset=\"https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-27.png 1073w, https:\/\/www.lexingtonlaw.com\/blog\/wp-content\/uploads\/2024\/02\/image-27-768x772.png 768w\" sizes=\"(min-width: 767px) 600px, calc(100vw - 35px)\" \/><\/figure>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"less-expensive-cash-advance-alternatives\"><a id=\"_pzq2wmx2ryvm\"><\/a>Less expensive cash advance alternatives<\/h2>\n\n\n\n<p>Despite their convenience, cash advances aren\u2019t always the best way to cover a cost. The following alternatives might better suit your financial situation and ultimately cost much less in the long run.<\/p>\n\n\n\n<ul>\n<li><strong>Consider a personal loan:<\/strong> If you have good credit, the interest rate on a <a href=\"https:\/\/www.lexingtonlaw.com\/bad-credit\/personal-loans\" target=\"_blank\" rel=\"noreferrer noopener\">personal loan<\/a> will likely be lower than that of a cash advance. You may not gain access to the cash as quickly, but you may save more money over the life of the loan.<\/li>\n\n\n\n<li><strong>Borrow from friends or family: <\/strong>Although it may be uncomfortable to ask, friends and family can be a great resource in an emergency. Should you consider this route, make sure to have a repayment plan in mind to ease your loved ones\u2019 financial burden.<\/li>\n\n\n\n<li><strong>Build an emergency fund: <\/strong>Although this is a longer-term solution, having an easily accessible emergency savings fund ensures you\u2019ll always have cash on hand when you need it the most. This could help you avoid the need for a cash advance.<\/li>\n\n\n\n<li><strong>Use home equity:<\/strong> If you\u2019re a longtime homeowner, you may qualify for a home equity loan or line of credit. This strategy allows you to borrow against the value of your home and pay it back over time with a variable rate (i.e., home equity line of credit) or a fixed interest rate based on your credit score (i.e., home equity loan). Talk to a financial planner about which choice is right for your situation and credit.<\/li>\n\n\n\n<li><strong>Adjust your 401(k) contribution: <\/strong>Saving for retirement is a wise choice, but you might consider temporarily changing your 401(k) contributions if you need liquid funds. After consulting with a financial advisor, talk to your employer\u2019s HR department about how to make changes to your paycheck.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"address-credit-reporting-errors-with-lexington-law-firm\"><a id=\"_esrybmtj6jt9\"><\/a>Address credit reporting errors with Lexington Law Firm<\/h2>\n\n\n\n<p>Cash advances can be helpful in a bind, but sometimes, late and missed payments are reported in error\u2014and might even go to collections. These errors can have a significant impact on your credit, and that\u2019s where Lexington Law Firm can help. <\/p>\n\n\n\n<p>Our team of professional legal consultants are here to assist you with addressing errors on your credit report. In addition to assisting with challenging these errors, <a href=\"https:\/\/www.lexingtonlaw.com\/our-services\" target=\"_blank\" rel=\"noreferrer noopener\">our services<\/a> include credit monitoring, identity theft insurance and assistance with inquiry disputes. Get a <a href=\"https:\/\/www.lexingtonlaw.com\/credit-snapshot\/pi\" target=\"_blank\" rel=\"noreferrer noopener\">free credit assessment<\/a> with Lexington Law Firm today to learn more.<\/p>\n\n\n\n<p><strong><em><a href=\"https:\/\/lexingtonlaw.com\/disclaimer\" target=\"_blank\" rel=\"noreferrer noopener\">Note:<\/a><\/em><\/strong><em> Articles have only been reviewed by the indicated attorney, not written by them. The information provided on this website does not, and is not intended to, act as legal, financial or credit advice; instead, it is for general informational purposes only. Use of, and access to, this website or any of the links or resources contained within the site do not create an attorney-client or fiduciary relationship between the reader, user, or browser and website owner, authors, reviewers, contributors, contributing firms, or their respective agents or employers.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you\u2019re wondering \u201cwhat is a cash advance,\u201d here\u2019s a simple explanation. Cash advances let you borrow funds against your credit limit, often for a fee.<\/p>\n","protected":false},"author":63,"featured_media":18823,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[9],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v18.1 (Yoast SEO v18.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is a Cash Advance and How Does It Work? | Lexington Law<\/title>\n<meta name=\"description\" content=\"If you\u2019re wondering \u201cwhat is a cash advance,\u201d here\u2019s a simple explanation. Cash advances let you borrow funds against your credit limit, often for a fee.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lexingtonlaw.com\/blog\/credit-101\/what-is-a-cash-advance.html\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"What is a cash advance and how does it work?\" \/>\n<meta property=\"og:description\" content=\"If you\u2019re wondering \u201cwhat is a cash advance,\u201d here\u2019s a simple explanation. 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