A cash advance is a form of credit card transaction in which cash is withdrawn rather than goods or services being purchased.
The procedure can be completed using an automated teller counter (ATM) or in person at a bank or other financial institution up to a set limit; for a credit card, this is the available credit limit (or some percentage of it).
Fees for cash advances typically range from 2 percent to 5 percent of the borrowed funds. The interest rate for cash advances made with a credit card is typically greater than the rate for credit card purchases. The interest on cash accumulates daily from the date it is made.
According to the standards of the credit card network, some “purchases” made with a credit card of products that are perceived as cash are also deemed cash advances, resulting in a higher interest rate and a lack of a grace period. Examples include government-required payments like taxes and fees, as well as non-bank financial transactions like money orders, prepaid debit cards, lottery tickets, gaming chips, and mobile payments.
Nonetheless, if the merchant does not reveal the real nature of the transactions, the credit card companies will treat them as though they were routine.
Despite the credit card network’s guidelines, which indicate that credit card holders should not be charged any additional price for making a purchase with a credit card, many businesses have passed the processing costs forward to the customers.