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I just got my first credit card. I haven't spent anything on it but I see that the Cash Advance APR is 27.5%.

Can someone tell me in layman terms what this means?

Raj
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    Some credit cards also supply checks as well that can be used to draw a Cash Advance on the card. My American Express card sends me such checks about twice a year in the mail, which I promptly shred. They're covered in marketing promotion to make them seem like a better deal than normal Cash Advances, but I added up their delayed interest totals and the dates and the fee to use the check, and it turned out to be exactly the same APR rate for 1 month, and worse if left more time unpaid. I'm of Quid's opinion that such advances should simply never be used. – Davy M Mar 23 '19 at 23:45

2 Answers2

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A "cash advance" is when you use your credit card in such a way that you receive cash. For example, if you use your credit card in an ATM machine and receive cash.

You should never ever use your credit card for a cash advance.

quid
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  • Thanks for the answer! I had no idea! Also, that means that I shouldn't even take Cashback from retail stores either, right? – Raj Mar 21 '19 at 20:09
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    Right, never take cash. The interest rate as you can see is awful, there is no grace period, so interest begins accruing immediately. MAYBE if you were being robbed and literally had a gun to your head, it would be worth it, otherwise don't even think about it. – quid Mar 21 '19 at 20:11
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    @Raj oh! You've had debit cards in the past and noticed they have a cashback feature. Yeah, that's a debit card thing. Credit cards don't support that. But if they did, then yeah, that would count as a cash advance and pay that interest rate. – Harper - Reinstate Monica Mar 21 '19 at 21:07
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    @Harper while that may be true for most credit cards, it is not the case for Discover. It even uses the purchase APR (https://www.discover.com/credit-cards/member-benefits/cash-over-purchases.html) – clcto Mar 21 '19 at 21:09
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    It includes not only cash but "cash equivalents", which includes such things as casino chips. – Acccumulation Mar 21 '19 at 22:08
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    This might be slightly too strong. I've used my credit card for this purpose when my debit card (from the same bank) broke. Initially, my bank charged its standard fee, but they waived it when I pointed out why I needed to use my credit card. It probably did help that I also used the bank's own ATM. – MSalters Mar 22 '19 at 08:57
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    I've used a CC to access cash while travelling abroad. Provided I go pay the balance same-day via online banking (or even apply a positive balance in advance), it can be cheaper than paying extra fees to draw using my debit card at a foreign bank. Often the currency conversion rates are better, too. – Kyle Mar 22 '19 at 09:38
  • Another reason not to do it (with some cards, in some countries) unless you absolutely must, is that your credit rating can be affected: it's considered a bad sign that you need a cash advance. – user432 Mar 22 '19 at 15:56
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    @Kyle: Yes, when travelling, positively loading your credit card and using it as a debit / cash card is the ONLY time withdrawing cash on it makes any kind of sense. – Binary Worrier Mar 22 '19 at 16:04
  • One of my credit cards always pushes promotional cash advance rates with convenience checks, literally several times a month... took them up on one which was 0% APR with a transaction fee that worked out to be a year at 2%: the cash ended making a higher return in investments. – user71659 Mar 22 '19 at 16:37
  • I have to downvote because there are rare situations where using the CC to withdraw cash make sense. – Mindwin Remember Monica Mar 22 '19 at 18:06
  • @Mindwin true, but if you have to ask what a cash advance APR is, you're probably safer following this advice so you don't get stuck paying a lot more than you expect. – Kat Mar 22 '19 at 20:23
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    Sometimes debit cards don't work and cash advance is the most convenient and cheapest way to get cash in a foreign country. This is not a rare situation for those of use who travel. Generally your payment will applied to cash advance first so you can simply do an online prepayment of a bit more than your estimated withdrawal (after conversion). Works a charm. – Spehro Pefhany Mar 23 '19 at 01:46
  • @Spehro "Generally your payment will applied to cash advance first..." Some companies do that, but it's not always guaranteed. For some extra peace of mind, a person can call their company to make sure the payments are applied to the worst debt first, that way there are no surprises when the next month's statement comes. – Davy M Mar 23 '19 at 23:48
  • "Never ever" is too loaded for an Expert's advice. And false. @kat - we shouldn't underestimate the reader's intelligence at the expense of objectivity. – Mindwin Remember Monica Mar 25 '19 at 12:07
  • There are other ways to handle the edge cases mentioned in these comments. I would never ever use a cash advance and don't think anyone else should either. Everyone who disagrees is free to write an answer. – quid Mar 25 '19 at 15:13
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A cash advance from a credit card is either using the card to get cash from an ATM, or sometimes you get checks that you can use. Any outstanding balance on these transactions will accrue interest at 27.5% annually.

The big downsides with these cash advances they begin accruing interest immediately, not after balance due date like normal credit card purchases. So there's no avoiding interest with a cash advance.

Best to avoid cash advances. Also, ideally you always pay off your statement balance each month to avoid any interest payments.

Edit: Removed out-dated info regarding cash advance portion being paid after regular credit card purchases, Credit Card Accountability Responsibility and Disclosure Act of 2009 eliminated this practice in 2010, and now payment in excess of minimum gets applied to highest interest rate first.

Hart CO
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    These cards accruing interest immediately wildly depends on the country you are in. – glglgl Mar 22 '19 at 10:14
  • I don't have enough rep to answer but also check of the order payments are used. any payments you make may pay off purchases (which aren't accruing interest yet) before the cash advance is repaid. So you buy some item for £50, get a £20 advance, if you repay £20 it may be used to replay the currently interest free item, and your cash advance continues to accrue interest. – WendyG Mar 22 '19 at 20:07
  • @WendyG: The minimum payment may be allocated that way, but in the USA the CARD Act (law) requires that any payments above the minimum have to be applied to the balance with the highest interest rate first. – Ben Voigt Mar 22 '19 at 22:13
  • @BenVoigt cool for Americans BUT we don't know where in the word this person lives. And even if he is american in my example that still leaves you £3.50 left accruing interest on your cash advance, which could be a surprise. – WendyG Mar 25 '19 at 09:58