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21 NOVEMBER, 2022

All About The Cash Advance On A Credit Card

A credit card helps make purchases, and most of you know this. However, the option of a cash advance, meaning cash withdrawals in advance using credit cards, is less explored.

Cash Advance on a Credit Card is the facility that allows you to withdraw cash from credit cards. Banks enable customers to withdraw funds from their credit card accounts with this cash advance facility. Simply put, when using the cash advance credit card features, you borrow money against your credit card.

Functional Aspects of Cash Advance on Credit Card

Suppose you only use credit cards for everyday purchases. A cash advance may seem appealing. And might seem a good choice if you need money immediately, but ensure a limited amount of money in your bank account. The cash advance option solves the resource problem.

In contrast to a debit card withdrawal, where you are accessing money from your account, a cash advance is essentially a loan from your credit card company charged to your account. Since cash advances frequently have a higher annual percentage rate and a transaction fee, you will need to be responsible for paying the cash advance fees on a credit card. Additionally, there is a limit on how much you can advance, which further limits the usability of this option.

Different Ways to Encash Credit Card

Listed below are some of the common ways to get cash from credit card using the cash advance option:

  • 1. From the ATM: redit card If you have a PIN for your credit card, you can use an ATM to get a cash advance. If you don't already have a PIN, ask your credit card issuer company to generate a PIN for you. Know that it might take a few business days to receive a PIN and that there are frequent limits on the amount of cash you can withdraw from an ATM.
  • 2. From the Bank: Visit the bank that issued the credit card to encash the credit card using the cash advance facility. You must present your credit card when requesting a cash advance at a bank branch, and the teller will only advance you the maximum amount allowed by your cash advance limit.
  • 3. Using Checks: Some credit card companies mail checks named "convenience checks," which are linked to your account. If you deposit them, the transaction qualifies as a cash advance, in which case the cash advance APR applies to you. Transaction fees may also apply as per the company norms.

Cash Advance Fee in Credit Card

Obtaining cash advance on credit cards involves several costs and convenience fees, as detailed in the sections below:

  • 1. Cash Advance Annual Percentage Rate (APR): "Interest" and "annual percentage rate" (APR)" are interchangeable terms when speaking of credit cards. The annual percentage rate (APR) for cash advances is usually higher than the APR for other purchases made with the same credit card. Additionally, most credit cards do not provide a grace period for cash advances. It implies that interest will most likely start to accumulate right away.
  • 2. Cash Advance Fee: Each credit card cash withdrawal entails a cash advance fee, which varies from bank to bank.
  • 3. ATM or Bank Fee: The financial institution handling the transaction, such as the owner of the ATM or the bank where you receive your advance, imposes this fee as their service charge.
  • 4. No Grace Period: A grace period does not apply to cash advances. As a result, interest starts to accrue as soon as you withdraw a cash advance. This system differs from credit card purchases in which, if you pay your balance in full by the due date, interest is waived for a grace period of 21 days.
  • 5. Allocating Payment: If you have a cash advance on your credit card and are only paying the minimum payment due for that cycle of your bills, the payment applies to your outstanding balance rather than your cash advance. So banks generally opt to pay off balances with lower interest rates. But such a transaction would be much more expensive because your cash advance carries a higher interest rate starting the day the advance is made. Therefore, paying a minimum balance is advised.

Ways to Reduce Cash Advance Fee

Although a cash advance may not be a wise financial move; however, if it's your only option, bear the following considerations in mind to reduce additional costs:

  • 1. Pay-Off Immediately: There is no grace period in cash advances; therefore, interest starts to apply right away. Therefore, consider paying off the cash advance as soon as possible to avoid paying a significant amount in interest on the transaction.
  • 2. Read the Fine Print: Always review the terms and conditions for your particular credit card on the bank's website or in the card's supplementary materials. Each bank has policies regarding the amount of interest applied to cash advances. The terms for different credit card types can also occasionally change. Therefore, reading the terms and conditions is significant to avoid incurring additional costs.

Impact of Cash Advance on Credit Score

Utilising a credit card cash advance won't harm your credit score because credit bureaus do not report these transactions. However, occasionally you might struggle to keep up with your monthly payments due to the high APR on credit cards cash advance. Consequently, even a single missed payment can lower your credit score and be recorded on your credit report.


Credit cards offer numerous advantages and choices for facilitating cashless payment. However, for some purchases, you only need paper money; in these cases, the ability to get a cash advance on a credit card can be useful. You can withdraw cash using this payment method while using your credit card.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.