A cash advance refers to a financial service provided by banks, credit card companies, and some other financial institutions. It allows cardholders or account holders to withdraw a specific amount of money from an ATM or a bank branch using their credit card or debit card. This withdrawal is typically a portion of the cardholder’s credit limit (in the case of a credit card) or a portion of the available balance (in the case of a debit card).
A cash advance provides quick access to cash, which can be useful in situations where physical currency is needed urgently, such as when travelling or during emergencies.
Cash advances usually come with high fees and interest rates. Unlike regular card purchases, which may have a grace period before interest accrues, cash advances often start accumulating interest immediately.
A cash advance is not the same as a loan. It’s essentially a short-term borrowing against the credit limit of a card, and the terms and conditions are specific to the credit card issuer.
Taking a cash advance can lead to debt accumulation if not managed carefully. Due to the high costs associated with cash advances, it’s generally advisable to consider alternative options for obtaining cash, such as using a personal loan or savings.
Some credit cards may have a separate cash advance limit, which may be lower than the overall credit limit. This is an important consideration to be aware of before attempting a cash advance.