Cash advance defined

Writer and editor - Bryan Robinson | Updated on 2023-03-05

What is a cash advance?

A cash advance is a short-term loan typically used to cover unexpected expenses or to bridge a short-term financial need. Cash advances are often made through credit card companies.

There are two types of cash advances: one that you request from your credit card company, and one that you receive from a bank or other financial institution when you use your ATM card. However, both types of cash advances usually come with fees and/or interest rates that make them more expensive than other borrowing options.

Types of cash advance

  • A credit card cash advance is a feature that many credit cards provide. Essentially a short-term loan, the borrower can receive cash or a cash equivalent up to 20% or 30% of the card’s available credit limit. Some credit cards allow you to withdraw up to 50% of your available credit limit.
    Cash Advances from Merchants
  • Payday loans allow you to borrow money from payments from your employer in the future. Most payday lenders will require proof of income, such as a previous pay stub. Funds can be accessed both physically and online.
  • Line of credit. A line of credit is a flexible loan that allows a borrower to borrow up to a certain amount of money and then pay it back over time with interest. The borrower can choose to use the full amount of their line of credit, or just a portion of it, and they can make payments on it whenever they want or need to. A line of credit can be used for shortterm financing needs and is often used to cover unexpected expenses or to finance longterm projects.

How does a cash advance work?

The loan is typically paid back on the borrower’s next payday, although some lenders may allow for repayment in installments.

What are the benefits of a cash advance?

There are a few benefits of cash advances, namely that they:

  • Provide you with quick access to cash when you need it
  • Can be used for a variety of purposes
  • Are typically easy to obtain

Cash advances can be a helpful way to access funds in a pinch, but it’s important to remember that they should only be used as a short-term solution. If you find yourself relying on cash advances often, it may be time to reconsider your finances.

What are the risks of a cash advance?

There are a few risks associated with cash advances, but these can be mitigated if you are aware of them ahead of time. First, cash advances generally have higher interest rates than other types of credit, so you will end up paying more in the long run if you don’t pay them back promptly. Second, cash advances are often subject to fees, so you will need to factor that into your budget when considering one. Finally, if you use a cash advance to make a purchase that you later cannot afford, you may be stuck with high-interest debt that will be difficult to pay off.

How can I get a cash advance?

To get a cash advance, you can check our options here:

Bryan Robinson

Bryan Robinson
Writer and editor

Bryan Robinson is a finance writer with expertise in lending and their interest rates, fees, contracts and more.
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