What is a Cash Advance?

28th Feb 2025

Ever been in the situation where you need cash quickly but don’t have enough in your bank account? We’ve all been there. In these situations, one option is taking a cash advance using your credit card. However, just like regular credit card transactions, you’ll need to repay the amount, and cash advances typically come with additional fees and a higher interest rate. While credit cards can be great for making large purchases, taking a cash advance can end up being an expensive option, especially when you look at the impact on your credit score.

How Cash Advances Work

A cash advance with a credit card is easy to access – simply go to an ATM and withdraw cash using your credit card, just like you would with a debit card. Lenders will usually charge a cash advance fee, which is a percentage of the amount you withdraw. It’s better to withdraw the full amount you need in one go rather than multiple smaller withdrawals to avoid paying multiple fees. In addition to the withdrawal fee, interest will usually start accumulating immediately, sometimes on a daily basis. Credit card cash advance interest rates are often higher than regular purchase interest rates, so it might be worth considering whether using your card to buy the product or service directly might be a better option than taking out cash.

Cash Advances and Your Credit Score

Taking a cash advance can impact your credit score. It will appear on your credit report, and as it’s one of the most expensive way to get cash, using cash advance on a regular basis might raise red flags that you have no other options for accessing money.  So as a one-off it’s probably not going to influence your credit score, but on a regular basis it will.

Withdrawing Cash Abroad

While it’s common to use debit cards for cash withdrawals at home, it’s not always the best option when you’re travelling abroad on holiday or for business. Many debit cards charge a 3% transaction fee for overseas withdrawals, plus a potential additional fee for each purchase, usually around £1.50 (this can vary by bank). Some credit cards, particularly travel cards, may offer better rates than debit cards for international cash withdrawals. Credit reference agencies know that many people rely on cash advances when travelling, and this won’t reflect on your credit report in the same way as repeated small withdrawals in the UK would.

Consider Your Options

When considering a cash advance, it’s important to weigh the costs, especially with regard to fees and interest rates, as they can add up quickly. If your credit score is already not as strong as it could be, look at other options for getting cash or paying for goods to avoid damaging it even further. An emergency cash withdrawal as a one-off isn’t going to damage your credit score, but cash advance isn’t something you want to be relying on as a way of funding your regular everyday spending.