Is it even possible to do this without incurring a cash advance fee? It isn’t possible with a traditional cash advance, unfortunately. Cash advances from credit cards are not the best thing to do, in general. The fees involved are usually quite steep. Worse yet, if you don’t have the discipline to use a cash advance responsibly, they can lead to digging a hole of debt. What makes them so terrible is they (1) charge much higher interest rates compared to using your card for purchases, (2) come with additional fees, and (3) have no grace period (i.e. you start incurring interest from the date of the cash advance. With purchases you at least have a 20 – 25 day grace period before any interest gets applied to the balance).
Better Alternative = paying via Paypal
Why is it that you need the cash anyway? In today’s world it’s pretty easy to live without actual currency for extended periods of time. If it’s because you need to pay an individual or a business that won’t accept credit cards, then ask if they’ll accept a Paypal payment. As a sender, it’s free for you to use. For the recipient, Paypal charges them a flat fee of just under 3%. Since Paypal transaction are typically classified as a purchase, it may save you money, especially if you’re using a 0% intro offer.
That being said, I understand there could be scenarios where they might be no other option. Here’s how to do a cash advance with a credit card the bad way:
Depending on your card, you options for getting a cash advance will include one or more of the following:
- Convenience Checks mailed by your card issuer: Sometimes those checks you get in the mail can be written out to yourself, too. When that’s the case it usually means you will be paying the cash advance interest rate.
- ATM: You set a PIN code on your card and use it at an ATM machine to withdraw money (this is probably the most common way)
- Bank Deposit: This is done over the phone with your card’s customer service. You provide them your checking account information and they do an electronic (ACH) deposit into it, which usually will take one or two business days.
Why are those ways so bad?
Reason #1: Much higher interest rate
It’s almost guaranteed that the APR on cash advances is going to be dramatically higher than what it is for purchases and balance transfers. There is a reason for this and it’s not entirely due to bank greed. They’ve figured out over the years that people who take cash advances on their credit card are much more likely to be in financial trouble and won’t be able to pay them back. That’s why they soak everyone with higher fees and interst charges to offset this probable loss. Here’s an example from a Discover card account. But not to pick on Discover… Bank of America, Chase, Citibank, Capital One, US Bank, Wells Fargo, American Express and any other bank you can think of does the exact same thing.
Reason #2: Interest accrues immediately
With regular purchases you have a grace period to pay. If you pay during the grace period you won’t get charged a dime of interest (but if you pay after the interest will be charged going back to date of purchase).
Contrast that to credit card cash advances, where the interest begins from day one, regardless of whether or not you pay it back during the grace period. So, with credit cards you’re getting a free, unsecured loan from the credit card issuer each month – not a bad deal. Cash advances are the opposite of a good deal.
Reason #3: Transaction fees
Banks used to tack on an extra fee of “only” 1% to 2% and now many are charging 3% to 5%. That means if you took an advance of $500 right off the bat you will be charged up to $25 in transaction fees (as well as the immediate accruing interest).
if you just want a small amount, the transaction fee is usually a $10 minimum no matter what… even if you’re just advancing $20! Oh yeah and if you’re doing this through an ATM, expect to get hit with an extra fee from that as well!
Are there any other alternatives?
As you can see, the fees plus the interest makes these outrageously expensive. But there may be a few ways how you can get a cash advance on a credit card and pay less:
Technique #1: Promotional checks that don’t charge higher APRs
As mentioned most of these checks you get in the mail charge a higher fee if you write them to yourself, but once in a while they don’t. Read over their fine print carefully to see how they operate.
Technique #2: Amazon Payments loophole
Did you know that Amazon has a competing service with Paypal? Never heard of it? Well, it’s been poorly publicized and kind of under the radar – but it’s a great way to achieve some ways around payment issues.
When you use this Amazon service to send personal payments, you can do so for up to $500 per month for free. Even if you’re using a credit card to send the money, they won’t charge you the normal fees if you stay within that amount (if not, the fees are comparable to Paypal).
Conclusion? This backdoor can be used to pay someone using your credit card, up to $500, for free. Although I doubt this offer will stick around once the service gets big. They’re probably just taking the hit on the credit card fees for now to grow its popularity.
If your spouse, family member, etc. has one of these accounts they can receive money, but I just want to point that might be violating the credit card co’s rules about circumventing cash advance fees/interest, if you are paying a spouse, etc. So legally, I need to say you should check with them before doing that to make sure it’s allowed.
Technique #3: No interest on purchases
This technique isn’t for getting a cash advance from a credit card, but rather something you might be able to do in lieu of it.
If you have a credit card promotion for 0% on purchases, then you can use that for Paypal, Amazon Payments, etc. and avoid interest charges (even if it will take you more than one billing cycle to pay). Again, just make sure you follow the bank’s rules when doing so.
Written or last updated January 19, 2016