Understanding the True Cost of Cash Advances

Using a credit card cash withdrawal – often called a cash advance – might seem like a convenient way to access money quickly. Whether you’re facing an unexpected bill or need cash urgently, most UK credit cards allow you to withdraw money from an ATM or bank. But the reality is that this service comes at a steep cost.

In this guide, we’ll explain the cash advance definition, outline cash advance charges on credit cards, and answer common questions such as “does withdrawing cash from a credit card affect your credit score?”

What Is a Cash Advance on a Credit Card?

A cash advance is when you withdraw money from a credit card either at an ATM, in a bank, or by transferring funds to your current account. Instead of being treated like a purchase, it is classified as a credit card cash withdrawal, which has its own set of fees and interest rates.

👉 Learn more about different ways to borrow money (inbound link).

How Does a Cash Advance Work?

When you take cash from your credit card:

• The money withdrawn is added to your balance.

• A cash advance fee is applied – usually 3–5% of the transaction (with a minimum charge of around £3–£5).

• Interest starts immediately – there’s no interest-free grace period.

Example of a Cash Advance Fee

If you withdraw £200 with a 5% cash advance charge on your credit card, you’ll pay:

• £10 fee (5% of £200).

• Interest from day one (often at a higher rate than purchases).

That £200 could quickly cost you much more if not repaid quickly.

Cash Advance Charges and Fees

1. Credit Card Cash Withdrawal Fee

Almost all UK card providers charge a cash advance fee. This can be:

• A percentage (3%–5% of the withdrawal).

• Or a flat minimum fee (usually £3–£5).

2. Cash Advance Interest Rates

The cash advance APR is typically higher than purchase APR. For example:

• Purchases: 18.9% APR (typical).

• Cash advances: 29.9% APR or higher.

3. No Interest-Free Period

Unlike purchases, which often have up to 56 days interest-free if repaid in full, cash advances start accruing interest immediately.

4. ATM and Bank Charges

If you use an ATM, the operator may add a withdrawal fee. Overseas withdrawals add foreign usage charges (often 2.99% plus a fee).

👉 See MoneyHelper’s guide on credit card cash withdrawals (outbound link).

Does Withdrawing Cash From a Credit Card Affect Your Credit Score?

Yes, indirectly. Here’s how:

• Increased Credit Utilisation – Taking a cash advance raises your balance, which increases your credit usage. A higher utilisation ratio can lower your credit score.

• Potential for Missed Payments – Because of high fees and interest, it’s easier to fall behind. Late or missed payments damage your credit record.

• Signals to Lenders – Regular credit card cash withdrawals may signal financial stress to lenders, making it harder to get approved for loans or mortgages in the future.

👉 Learn more from the FCA about credit scores and borrowing (outbound link).

Alternatives to Withdrawing Cash From a Credit Card

Before using a cash advance on your credit card, consider cheaper alternatives:

• Personal Loans – Typically lower interest rates and fixed repayments. 👉 Compare UK personal loans (inbound link).

• Overdrafts – While not always cheap, overdrafts can be less costly than cash advances.

• Money Transfer Credit Cards – Some offer promotional low-interest transfers directly into your current account. 👉 See MoneySavingExpert balance transfer deals (outbound link).

• Borrowing from Friends/Family – May avoid fees if repaid responsibly.

Managing a Cash Advance Wisely

If you absolutely must take out a cash advance using a credit card:

• Withdraw only what you need – Don’t max out your cash limit.

• Repay quickly – Interest starts immediately, so clear the balance as soon as possible.

• Track charges – Review your statement for cash advance charges and cash advance fees.

• Avoid repeat use – Regular cash withdrawals suggest poor money management and harm your credit profile.

Conclusion

A credit card cash withdrawal may seem like a quick fix, but with cash advance fees, higher interest rates, and no interest-free period, it’s one of the costliest ways to borrow in the UK.

If you’re asking “can I withdraw cash from a credit card?” – the answer is yes, but the better question is “should I?”

Always consider cheaper options such as personal loans, overdrafts, or money transfer cards. If you do use a cash advance credit card, repay it as quickly as possible to avoid escalating debt and long-term financial strain.