What is cash access line on credit card

Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors' opinions or evaluations.

When you’re strapped, you might consider a cash advance from your credit card. A cash advance is a means of accessing money without applying for a formal loan. Cash advances do not require a credit check when drawn from existing accounts and can provide funds immediately.

What Is a Cash Advance?

A cash advance is essentially a short-term loan, often borrowed from a credit card issuer. Taking out a cash advance involves borrowing against your credit card’s credit limit, but often involves a separate cash advance APR and a separate fee. Some issuers may also establish a separate credit limit specific to cash advances.

The fee and interest you pay for a cash advance is typically directly related to the size of your withdrawal and the length of your repayment, so cash advances are considered to be expensive and when used, should be considered a short-term solution. Because issuers also limit the maximum amount of cash you can access, a cash advance may not be sufficient to cover large expenses. Forbes Advisor does not recommend cash advances as a means of accessing fast cash. Instead, try one of these alternatives.

Types of Cash Advances

Credit Card Cash Advances

A credit card cash advance is a feature offered by many credit cards. Essentially a short-term loan, the borrower can receive cash or a cash equivalent usually up to 20% or 30% of the available credit limit on the card. Some cards will allow you to withdraw 50% or more of your available credit limit.

Merchant Cash Advances

Merchant cash advances (MCA) extend funds to small business owners based on past sales and a projection of future sales. If your business brings in a decent amount of daily credit card and debit card sales, you will likely qualify and have the funds in a matter of days. With a simple application, you can have the funds in hand within a few days.

Payday Loans

Payday loans provide you access to future payment from your employer. In most cases the payday lender requires proof of income such as a previous pay stub. Funds can be accessed at a physical location or online. However, payday loans can be extremely predatory, and should be avoided.

How a Cash Advance Works

The process varies with the type of cash advance as well as with the lender:

Credit Card Cash Advances

You can access a cash advance at an ATM, the financial institution for your card or by writing a convenience check. also known as an access check, periodically mailed in your monthly credit card statement.

Merchants may treat specific credit card usage as a cash advance, as well. Some transactions may be processed as a cash advance including:

• Initial deposits when opening a bank account
• Overdraft protection when a credit card secures a checking or savings account
• Foreign currency, traveler’s checks or money orders
• Gold or virtual currencies
• Wire transfers
• Lottery tickets, casino chips and gambling wagers
• Some gift cards and prepaid cards

You will pay compounding interest on the advance from the first day the cash is extended plus an up-front service fee. Additionally, most credit card companies only make a portion of your revolving credit line available for use as a cash advance. This amount is often printed on your monthly statement or visible when you log into your account online.

Merchant Cash Advance

Merchant cash advances are not usually extended by your credit card provider, but are offered in partnership with the payment processor for your credit and debit cards sales. Unlike a typical loan, merchant cash advances do not charge an APR. Instead your repayment is based on a factor of your daily sales. This means that you will make a daily repayment based upon your sales at a factor of 1.2 to 1.5.

If you borrow $15,000 at a factor of 1.3. You will need to repay $19,500 plus any origination fees.

This factor means that your daily payment may increase if your sales are high and may further reduce your business cash flow. Likewise, the payments are intended to fall if daily sales drop. However, the FTC received complaints during the pandemic that not all MCA processors conducted the “true-ups” promised to reduce payment when sales dropped.

Payday Loans

Payday loans are intended to be short-term, small amount loans secured by a deferred presentment transaction. The borrower provides a post-dated personal check or permission for a future electronic withdrawal. Even though they are called payday loans, the funds can also be secured by other income such as a pension or Social Security.

While these loans may seem small, often under $500, the fees can be enormous. To obtain a payday loan the borrower commits to finance charges often $10 to $30 for every $100 borrowed. These fees are added to the loan principal on the date of the transaction.

Assuming a $15 finance fee per $100 borrowed on $400, your loans and fees would cost $460 by your next paycheck, often within two weeks. If these fees were calculated as an annual APR this loan is charging over 390% in interest.

Some states allow lenders to roll-over or renew loans if the borrower cannot repay the loan plus fees in full. Depending on the state, these fees could include finance charges, interest, late fees or insufficient funds fees. The true cost of payday loans means that you almost always have better options.

Cash Advance Credit Card Options

If you plan on a cash advance from a credit card, there are a few ways to reduce your cost. Most credit cards charge a fee or a percentage, whichever is greater. If you know that a cash advance is in your future, consider a credit card offering 3% on cash advances such as the Capital One Venture Rewards Credit Card as opposed to those charging 5% or more.

Credit cards also charge a separate APR for cash advances, which is usually higher than your purchase APR. Make sure you shop for the lowest APR you can find on cash advances.

One of the best credit cards for cash advances is the PenFed Platinum Rewards Visa Signature® Card*. With no fee and a lower-than-industry cash advance APR, this card will make a cash advance much less onerous.

Why Are Cash Advances Expensive?

Several costs come built-in with cash advances.

Cash Advance Fee Structure

Credit card cash advance fees include both up-front fees and interest. Up-front fees are usually a flat fee or a percentage of the cash advance, whichever amount is greater. This fee posts to your account the same day as the cash advance transaction. Common up-front flat fees range from $5 to $12 or 3% to 8%.

Most cards do not offer a grace period for cash advances. You will begin paying interest from the first day the cash advance posts to your credit card. For most credit cards, the cash advance APR is significantly higher than the APR for purchases. Cash advance interest rates typically range from 17.99% to 29.99% APR.

Some cards designate various APR for different types of cash advances. Bank of America assigns APR to direct deposit and check cash advances and a higher APR to bank cash advances including ATM, over-the-counter, overdraft protection and cash equivalent transactions. Check your credit card’s terms to find out what to expect from your specific card.

Other Potential Costs of a Cash Advance

Your credit card cash advance is often limited to a portion of the revolving credit line. For instance, if you have a credit limit of $3,000, your cash available is likely $600. With a transaction fee of 4% and no other purchases on your card, you would pay $24 up front and approximately $13 in interest given a 30-day billing cycle with a common 24.99% APR. If you only make the minimum payment of $27, you would pay nearly $236 in interest over 32 months before paying it off. This means that in total, you would pay $260 in interest and fees to borrow $600.

There are additional costs to consider. Withdrawing a cash advance from an ATM will likely incur a fee from the bank or company operating the machine. If you request a cash advance in a foreign currency, a foreign transaction fee could be charged as well. And if you accessed that foreign currency at an ATM there may be a transaction fee for the cash advance, a foreign transaction fee and an ATM operator fee added to your costs.

Using convenience checks issued by your credit card provider could result in unexpected fees. If you write a check over your available cash advance limit, your credit company may not honor your check. According to Luke W. Reynolds, the Chief of the Community Outreach Section of the FDIC, a returned check could incur returned-check fees and over-limit fees from your credit card provider.

Try contacting your credit card company before writing a convenience check to ensure the cash advance is not over your limit. If you plan to deposit this check to your bank account, he advises calling the credit provider after depositing the check and the bank before spending the fund to ensure the check was honored. If the check was not honored and you spend the funds, you could also be charged overdraft fees from your bank.

Note that cash advance checks are different from promotional APR checks that banks may offer from time to time. Using a promotional APR check allows you to access funds at a lower rate than a cash advance—or sometimes even lower than your regular APR. These promotional APR checks can be a good deal if you need to pay off bills with a higher interest rate. If you are unsure which type of check you have, check with your bank before you use that check.

And lastly, if you are unable to make your payments for more than 60 days late on a credit card payment, your card provider could apply a penalty APR.

Cash Advance Pros and Cons

Pros

• Provides quick access to unsecured funds—no collateral required
• Easy to get—no underwriting or credit check involved

Cons

• Extremely high APR and fees
• No grace period—credit card cash advances begin accruing interest on day one

Other Considerations for Cash Advances

• Credit card cash advances do not earn rewards points.
• Convenience checks are less secure and offer fewer consumer protections than credit card purchases.
• Your credit card may require a PIN to access a cash advance from an ATM.
• While merchant cash advances are unsecured, you may be required to sign a personal guarantee making you responsible for repayment even if you go out of business.
• Repayment for merchant cash advances and payday loans often result in a payment that would be a triple digit APR.

Alternatives to Cash Advances

Personal Loan

If you have good credit, consider a secured or unsecured personal loan from your financial institution. Even with the potential origination fee and interest, the interest rates are typically lower than those for cash advances. This solution will take longer and require additional paperwork. However, if you need a larger amount of money, a personal loan could meet that need with less overall cost.

Retirement Account Loan

You can withdraw the funds you contributed to a Roth IRA at any time without penalty. For tax-advantaged retirement accounts like 401(k)s or Traditional IRAs, you can access funds with an early withdrawal penalty. Both options provide methods to repay the money withdrawn within specific time parameters.

Negotiate a Payment Plan

Contact your creditors or service providers if you believe you cannot make your payment. If your credit account is in good standing, you may be able to negotiate a lower interest rate. If creditors offer you an extension on payments, ensure you know what fees are associated with that service. For other bills like utilities, you can request a payment plan.

Pay Bills With your Credit Card

If there are bills you usually pay with cash or an ACH transfer from your checking account, consider putting them on your credit card. While there may be a convenience charge for some purchases, car insurance, cell phone and internet bills can usually be charged with no additional cost. This option could free up cash in your budget and would not incur the additional fees or higher APR of a cash advance.

Chime

Chime is a mobile banking app that offers a few features to get money to you faster. It’s important to note that Chime is a financial technology company, not a bank. Banking services are provided by, and debit card issued by, The Bancorp Bank or Stride Bank, N.A.; Members FDIC.

With direct deposit** to your Chime account, you gain access to funds on the date Chime receives the payment, which could be up to two days before the scheduled payment date. How early your paycheck arrives will depend on when your employer releases the funds.

Each Chime account with at least $500 in monthly direct deposits qualifies for up to $20 of fee-free overdraft protection on debit card purchases, via a feature called SpotMe^. Based on your account history and other risk factors, Chime may increase the SpotMe limit to up to $100. (SpotMe does not apply to ATM withdrawals, ACH transfers, Pay Friends transfers or Chime Checkbook transactions.)

For small amounts, using the SpotMe overdraft protection for debit card purchases would incur fewer fees than a cash advance.

Is a Cash Advance Right for You?

For urgent needs, a cash advance is an easy, but expensive, way to access funds. Make sure that you have the necessary cash advance credit line available on your credit card and plan to pay the cash advance off as soon as possible. Remember that your credit cash advance line is usually a limited percentage of your overall credit line and that interest charges start accruing right away.

Make sure you understand the fees and consider all your options. In many cases, there are less expensive alternatives to cash advances. If you’re a merchant, make sure to read the fine print very carefully. You will likely want to consider other options if required to personally guarantee repayment.

Find The Best Credit Cards For 2022

No single credit card is the best option for every family, every purchase or every budget. We've picked the best credit cards in a way designed to be the most helpful to the widest variety of readers.

Bottom Line

You probably shouldn’t get a cash advance, unless you’re out of options. Cash advances, while convenient, are extremely costly ways to gain access to fast cash. If you’re in a pinch and cannot use any of the alternatives to cash advances, be sure to pay off a cash advance as quickly as possible—interest accrues starting the same day a cash advance is made and often at a higher rate than a card’s regular APR.

**Early access to direct deposit funds depends on the timing of the submission of the payment file from the payer. We generally make these funds available on the day the payment file is received, which may be up to 2 days earlier than the scheduled payment date.

^Chime SpotMe is an optional, no fee service that requires a single deposit of $200 or more in qualifying direct deposits to the Chime Checking Account each month. All qualifying members will be allowed to overdraw their account up to $20 on debit card purchases and cash withdrawals initially, but may be later eligible for a higher limit of up to $200 or more based on member’s Chime Account history, direct deposit frequency and amount, spending activity and other risk-based factors. Your limit will be displayed to you within the Chime mobile app. You will receive notice of any changes to your limit. Your limit may change at any time, at Chime’s discretion. Although there are no overdraft fees, there may be out-of-network or third party fees associated with ATM transactions. SpotMe won’t cover non-debit card transactions, including ACH transfers, Pay Anyone transfers, or Chime Checkbook transactions. See Terms and Conditions.

Frequently Asked Questions (FAQs)

What is cash advance APR?

A separate, cash advance APR is used to charge cardholders for the convenience of fast cash with a credit card. This APR is often higher than a regular purchase APR. Cash advance transactions also typically are not subject to a grace period, so your cash withdrawals often accrue interest on the same day the transaction is made.

What is a merchant cash advance?

A merchant cash advance (MCA) is an alternative financing model for small businesses. With an MCA, businesses can borrow a lump sum of money and repay the lender (often a credit card processor) with a percentage of future credit card transactions.

How should I pay off a cash advance on a credit card?

Pay off cash advances made using a credit card as soon as possible. The best way to pay off a cash advance is by making payment to the lender on the same day the withdrawal was made, since cash advances accrue interest the same day a transaction is made. Payment is typically made the same way you would normally pay down a credit card balance.

What does cash access line mean for credit card?

What is the difference between a credit limit and cash access line?

What does cash line mean?

How do I use my cash credit line?