Unlike with purchases, cash advances have no grace period: Interest starts accruing right away, as soon as you borrow the money.
And most cards charge an upfront fee for cash advances — typically, either $10 or 5 percent of the advance, whichever is higher.
Say you buy a $1,000 item on a credit card with a 15.79 percent interest rate and pay the balance off within 30 days. In this case, you would pay no interest because of the grace period.
But a $1,000 cash advance will typically cost you nearly $70, even if you pay the debt down in 30 days (based on an upfront $50 fee, plus $19.73 for 30 days of interest at 23.68 percent).
Given the cost, using a card advance makes sense only if the other alternatives — such as a payday loan or car title loan, which can carry triple-digit annual percentage rates — are even worse, said Matt Schulz, the senior industry analyst at CreditCards.com.
Cash advances include withdrawals at A.T.M.s using a credit card. They may also include so-called convenience checks — paper checks mailed to consumers that allow them to draw on their credit card.
Using a card to “buy” cash — whether it’s foreign currency for travel, or casino chips while visiting Las Vegas — is also considered a cash advance by default, Mr. Sullivan said. So it’s wise to make sure you understand the terms of your card to avoid unexpected charges. “You can inadvertently get a cash advance, if you’re not careful,” he said.
If you do take out a cash advance, Mr. Schulz said, make it a priority to pay off the balance. If you submit only the minimum monthly payment on your card, it will be very difficult to get rid of the costly debt, because most card issuers apply minimum payments first to lower-rate balances, before applying any extra payment over the minimum to higher-rate balances.