[2020.6 Update] According to DOC, using a credit card to send money to someone else through Paypal/Square/Venmo may now be treated by the credit card issuer as a Cash Advance (CA), in addition to the roughly 3% fee charged by the platform. Keep in mind that a Cash Advance not only incurs a fee charged by the bank, but also starts accruing interest immediately from the day it posts, with no grace period. So if this happens to you, it is best to pay off that portion of the balance right away. At the moment, policies on cash advances are still not very clear across banks, and there is no consistent standard. My guess is that behind the scenes, banks are pushing Paypal/Square/Venmo to change the merchandise code for direct person-to-person payments. Once the transaction is identified that way, the bank can charge a CA fee.

  • Bank of America: quite a few DPs indicate it triggers CA
  • Chase: some transactions trigger CA, some do not
  • AMEXDISCOVERCiti: there are currently no related DPs of CA, but that could change later
  • Related article

What does this mean for us? Previously, if you were a little short on minimum spending for a new card bonus, you could send money to a friend through PayPal or a similar service, then have your friend transfer the money back to you from their bank account. You would only need to pay the PayPal fee, around 2.75%. Also, Chase Freedom sometimes has a PayPal 5x category, so if you could not max it out, this was one way to come out a little ahead anyway (5x UR>2.75%). But if the transaction is treated as CA now, it will not count toward minimum spending, and it will not count as a normal purchase either, so there are no rewards at all. On top of that, the fees and interest can be very high.

However, you generally do not need to worry about normal purchases made through paypal. Those usually code as a purchase and do not incur a CA fee. If you still want to use freedom to send money for 5x or to complete minimum spending, the safer approach is to lower your credit card's cash advance limit. You can do this by phone or via secure message. But note that lowering your CA limit does not involve any Hard pull, while raising it again later may involve an HP.

What Is a Cash Advance (CA)

Most people are already very familiar with using a credit card to make purchases and then paying the bill after the statement closes. But a credit card can do much more than just regular shopping. Today, I want to introduce a relatively less commonly used feature of credit cards: Cash Advance. You may never need it, but it is still worth understanding what Cash Advance means, what fees it involves, how repayment works, and what alternatives exist. That way, if you ever need it in an emergency, you will not get hit with a large and unexpected bank fee.

Put simply, a Cash Advance (CA) means obtaining cash or a cash equivalent from a credit card. In general, using a credit card to withdraw cash from an ATM is definitely a CA, and funding a bank account may also be treated as a CA. Note that charge cards do not have CA functionality, such as Ink Bold and AMEX Premier Rewards Gold. In other words, they cannot be used for cash withdrawals.

When You Would Use a Cash Advance

Of course, if a merchant does not accept credit cards, or does not accept a certain type of credit card (AMEX,Visa,Discover,MASTER), you may need to get cash from an ATM to pay. And if you did not bring a debit card that allows fee-free cash withdrawals, you might have no choice but to painfully insert your credit card into the ATM next to you and withdraw cash. That is when a CA occurs. This situation is especially common at small eateries and Chinese restaurants, and some more remote independently owned gas stations also accept cash only.

One thing to note is that some credit cards require you to set up a 4-digit Pin before you can use the CA function at an ATM. So if you think you might ever need this feature, call the number on the back of your card and set up the Pin with the bank in advance, so you are not scrambling when the time comes.

Cash Advance Limits

Cash Advance is different from a regular purchase. A credit card's CA limit is often much lower than the card's normal purchase credit limit, usually around one-fifth of the total credit line. For example:

  • A Discover credit card may have a $500 credit limit and a $100 CA limit
  • A Chase credit card may have a $7,500 credit limit and a $1,500 CA limit

The reason the limit is much lower is that after using a credit card for normal purchases, it is relatively harder to just walk away from the debt. But once you use a CA to get cash, cash is easy to carry off and disappear with. So a lower CA limit is also one way for card issuers to reduce risk.

Cash Advance Fees and Repayment

The biggest difference between getting money through CA and making a normal purchase is the cost. The differences mainly show up in three ways:

  • Cash Advance requires an extra 2%-5% fee, while normal purchases generally do not
  • The APR on Cash Advance is higher than on normal purchases
  • Interest on Cash Advance is calculated differently from regular purchases

Cash Advance Fees

When we use a card for a normal purchase, we usually just pay the price of the item plus tax, with no extra fee. But when you use CA to withdraw cash, there is usually a fee based on a percentage of the cash withdrawn, generally between 2%-5% of the total amount. And that is not all: some ATMs also charge their own usage fee, around $5. For example, if you want to withdraw $100 from an ATM, the CA posted to your credit card could be $100* (1+5%) +$5=$110. By contrast, cash withdrawals with a Debit card generally do not incur that percentage-based fee, and some ATMs even waive their own fee for Debit cards on certain networks.

Cash Advance Interest and Repayment

In “When Should You Pay Your Credit Card Bill,” we mentioned that for normal purchases, as long as you have a Grace Period, you can avoid interest by paying the statement balance in full by the due date after the statement closes. But CA interest works differently. There is no grace period for CA. Interest starts accruing immediately on the day of the CA, using the separate APR for CA. That CA APR is usually several percentage points higher than the APR for regular purchases.

So if you use the CA function, it is best to repay it immediately. The fastest repayment methods are often paying by phone and paying at a branch/teller. For most banks, if your payment is made before the day's cut time, it will usually show up in your account right away. Only by paying it off immediately can you minimize interest as much as possible. If you cannot pay off the CA balance all at once, make sure to at least pay the Minimum Due every month. Otherwise, the CA APR may continue to rise. Once that snowball starts rolling, it can get out of control.

The Best Credit Card for Cash Advance

If you use CA frequently, which credit card on the market is the best companion for CA? The answer is:

This no-annual-fee credit card is practically designed specifically for Cash Advance (CA). Its main features include:

  • A flat $3 fee per cash withdrawal
  • A CA APR of 8.75% (most other cards are generally above 20%)

If you frequently rely on large cash withdrawals for short-term liquidity, this card can be a good choice. After all, if you pay at least the minimum payment each month and keep the annual interest rate around 8%, it is generally still manageable.

How to Avoid Cash Advance

Even though there is a great card for CA, most people still want to avoid this high-fee, high-interest monster as much as possible. But what if you really do need cash sometimes? And could other transactions that look normal actually be treated as Cash Advance transactions? Let us talk about how to avoid CA fees.

How to Get Cash Without Using CA

The simplest solution is, of course, to carry a bank debit card. With a debit card, cash withdrawals usually only incur a small ATM fee, if any, and the debit card is linked to your checking account. So as long as you have enough money in the account, there is no interest to worry about. One especially important thing to note: if there is not enough money in the linked checking account, a withdrawal or purchase could cause an over draft, which can also come with fairly high fees.

In fact, besides debit cards, some credit cards also let you get cash through a non-CA method. For example, the Discover it credit card can, at some merchants, show an option asking how much cash you want when you are about to pay. If you choose an amount, you can get cash at checkout at the same time. The amount available per transaction is usually fairly small, roughly within $100. This cash withdrawal is counted as part of a normal purchase, which means getting cash back this way does not incur an extra CA fee, and interest is calculated using the normal purchase APR. Of course, this cash portion does not earn 1% cashback. For details, see

How to Avoid Transactions That Trigger Cash Advance

As mentioned at the beginning of this article, CA is not caused only by withdrawing cash from an ATM with a credit card. It can also come from certain bank account funding transactions (initial funding) and purchases of cash equivalents. Typical other “purchases” that may trigger CA include:

  • Initial funding when opening a Checking/saving account
  • Using a credit card for money transfers, such as sending money through Western Union online with a credit card
  • Reloading certain prepaid cards, or buying some Visa gift cards at a bank

Whether these transactions are recognized as CA depends entirely on how each bank codes them. So if you can avoid them, try to do so. If you want to take advantage of them, it is best to first look for successful data points from others. If you are worried that even ordinary transactions might be treated as CA, you can call the bank and ask them to lower your CA limit to 0 (or to the minimum possible amount). Then even if you have a CA transaction, it will be automatically decline if it exceeds your CA limit, which means you will not incur the related CA fees and interest.

If one of your transactions accidentally triggers CA, and it is your first time, you can try calling the bank and explaining that you did not realize it would happen. If the bank is nice, they may waive the CA fee for you. Of course, you should still pay off the CA balance as quickly as possible by phone or at a branch.