When you withdraw cash from a credit card, it’s called a “cash advance.” It’s usually an option for you if you have a credit card.

Let’s take a closer look at the different types of cash advances, how they work, what fees are involved, and some alternatives to consider if you’re thinking about taking one.

How cash advances work

A cash advance means an advance of cash that your financial institution authorizes and that you can get by using a card or cheque including cash withdrawals and money transfers from an ABM, a financial institution or any other place (like a casino). Cash Advance includes other uses of your card account as well as “cash-like” transactions such as balance transfers, money orders, wire transfers, traveler’s cheques, purchase of lottery tickets (including home lottery tickets and lottery ticket subscriptions), gambling transactions (including online gambling), gaming transactions (including betting, off track betting, race track wagers, and casino gaming chips), cryptocurrency transactions and investment transactions.

Cash advance fees, interest and limits

Cash advances, in general, are subject to a cash advance transaction fee, which differs from card to card and sometimes also differs between types of cash advance. 

This means that every time you perform any transaction that counts as a cash advance (we’ll explore this later in the article), you may be charged a fee in addition to the amount of the advance and any interest that amount may accrue.

For most credit cards, the interest rate on cash advances is usually higher than the rate on regular purchases. Interest on cash advances also starts accruing immediately. While regular credit purchases often have an interest-free grace period (for example, 21 days), grace periods do not apply to cash advances.

There are also limits on the portion of your credit limit that can be used for cash advances (that is not separate or extra from your total credit limit) and there are daily limits set for cash advances made from automated banking machines. These limits are set for your protection as well as your financial institution’s. 

Limits on cash advance amounts vary from card to card

If you’re not sure what fees, interest rates, limits or protections apply to cash advances on your credit card, refer to your terms and conditions, which should be available online, or call your bank or credit card company.

Keep in mind that when you use a cash advance, you won’t have the opportunity to earn the same rewards or points on your purchase like you would in a regular credit card transaction. You also won’t be covered by the same protections offered by credit card providers.

If you need to use cash advances frequently, consider applying for a separate credit card with the lowest cash advance fees and interest rates you can find.

Whatever reason you have for taking a cash advance, always do your best to make sure you make a plan to pay off at least your minimum monthly payment each month when due. 

The different types of cash advances

Understanding if you’ve taken a cash advance can feel a bit tricky at first—especially because physical cash bills aren’t always involved. Let’s break it down. 

Here are the most common forms of cash advance:

Cash withdrawal (ABM or over the counter): Check to see if making the transaction is cheaper through an ABM or over the counter, because the applicable fees may be different.

Gambling: If you use a credit card to buy into an online poker tournament, purchase chips at the casino, place off-track bets, or even purchase 50/50 tickets at a hockey game, you’re making a cash advance transaction. While gambling charges often look like regular credit card transactions, especially online, they are subject to the same interest rates and limits as any other cash advance, and may or may not incur additional fees.

Credit card cheque (also called convenience cheques): Business credit card holders often use credit card cheques to pay their suppliers. Credit card cheques can also be used to make balance transfers between one credit card and another.

Quasi cash: Essentially, quasi cash refers to money in a different form. This includes precious metals, digital currency (for example, Bitcoin) and foreign currency.

Transfer to a chequing account: Borrowing from your credit card in order to add funds to a regular chequing account counts as a cash advance transaction. If you’re using this kind of transaction to pay off another credit card, consider waiting for a balance transfer promotion through your bank, which may enable you to transfer your credit card balance directly, at a lower rate.

If you’re unsure if you’ve used a cash advance, just take a look at your next credit card statement. 

When a cash advance is not your top option

If one of your goals when you’re using cash advances is to consolidate debt, consider taking out a lower-interest loan instead. If you’re worried you may not qualify for an ordinary loan, talk to your banker about consolidation loans, which are designed specifically for people trying to improve their financial situation by merging their debt.

Covering everyday expenses: choose a line of credit 

If you’re using cash advances to cover everyday living expenses or help out a family member or friend, consider applying for a line of credit instead. Lines of credit usually have lower interest rates than credit cards, and can be accessed without incurring high transaction fees.

Helping out family: learn more about transfers

If you’re using cash advances to exchange currency or send money overseas on a regular basis, talk to your financial advisor about how to do the transfers directly from your bank account. Or, learn more about making a global transfer through ATB.

Purchasing investments: weight the pros and cons 

If you’re using cash advances to purchase investments, think about how the interest and fees you’ll pay measure up against the profitability of the investments. If you have to use a cash advance—perhaps you’re purchasing digital currency—plan to pay off your balance at the end of the month or keep your balance low. 

With a cash advance, always plan ahead 

Using cash advances responsibly means understanding what happens after you use them. By planning ahead, ensuring you have the funds available, and making timely payments, cash advances can be a useful way to access cash and make certain transactions (such as purchasing Bitcoin).

If you’re considering taking a cash advance, empower yourself by learning about all the options available to you. Get in touch with our Client Care team or make an appointment at your local branch.