There may be times when you have a sudden expense and need cash urgently. If you have no other choice, you might consider getting a cash advance on your credit card.
While a cash advance may look appealing in financial emergencies, the additional fees and high interest rates can make it more expensive in the long run.
Most credit cards will let you borrow up to a certain amount, known as a cash advance limit. Your credit card provider will charge you a fee for withdrawing the money. Then, they’ll add the borrowed amount to your credit card balance.
Once you’ve withdrawn the cash, it will start building up interest immediately. This is different from how credit card purchases work, where you typically have a set period to clear the outstanding balance before you’re charged interest.
The Annual Percentage Rate (APR) for cash advances may also be higher than for credit card purchases. This can make the repayment more challenging.
You can request a cash advance by:
When you withdraw money on your credit card, your card provider will charge you a cash advance fee. This fee is essentially a service charge for withdrawing the borrowed money.
The cash advance fee will depend on your credit card provider. Usually, it will be a percentage of the amount you borrow (about 3%) or a flat fee (a minimum of £3).
The cash advance fees may seem small, but remember that small amounts become much bigger when you’re paying a higher APR.
Getting a cash advance won’t appear on your credit report. But certain behaviours can negatively affect your credit score, including:
Relying on your credit card for cash and taking on more debt can also indicate to lenders that you’re struggling financially, which could affect your ability to borrow money in the future.
If you’re in a financial emergency, a cash advance may seem like the best solution to get you out of it. However, cash advances can come with expensive drawbacks, so don’t rush into getting one without exploring other options.
Depending on your situation, you could use some savings – ideally an emergency fund if you have one – to cover the expenses.
An overdraft can be a useful way of borrowing money in the short term to cover unexpected costs.
You may be able to apply for an arranged overdraft or increase your overdraft limit (if you already have one). Use our overdraft eligibility checker to see if you’d be eligible for an arranged overdraft.
It’s important to understand the pros and cons of overdrafts, as you may be charged interest. And take steps to get out of your overdraft once your financial position improves.
If you’re in a tight financial spot and need extra support, you may be eligible for a personal loan.
You’ll need to repay any loan you take out, so make sure you research how personal loans work and choose one you can afford to repay.
A family member or close friend might be able to lend you money to cover your expenses. If you do this, be sure to write up a loan agreement so you can repay them.
