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You need cash now, but you don't get paid for a few more days. You always have the option of getting a cash advance through your credit card, but should you? Any time you use your credit card to receive cash from an ATM, it's considered a cash advance rather than a purchase, and that distinction is an important one. Before you make that transaction, here's what you need to know about cash advances.
When you make a cash advance, your credit card will usually add a cash advance fee. This kind of fee could be $10, or 5% of the amount of each transaction, whichever is greater. So if you needed $20, for example, you'd have to pay an additional $10 fee. (See also: How to Reduce the Costs of a Cash Advance)
Since cash advances are seen as having a higher risk of default than purchases, most credit cards will impose a higher interest rate on cash advances. While credit cards have an average interest rate of about 16% APR, it's common to see cash advance interest rates in the 22% to 30% range. (See also: 7 Times You Definitely Will Be Charged Credit Card Interest)
If you want to avoid the higher cash advance interest rates by paying off your statement balance in full, that won't work. Unlike purchases, interest on cash advances won't be waived by paying your statement balance in full. This means that you'll be incurring interest on your cash advances from the day they're made until you make a payment.
Thankfully, any credit card payments above the minimum will be applied first to the balance with the highest interest rate, which is likely to be the cash advance balance. If you have to make a cash advance with your credit card, make a payment as soon as possible to minimize your interest costs.
In addition to the credit card cash advance fees and cash advance interest charges, you can still be charged foreign transaction fees of up to 3% when you make a cash advance outside of the United States. In fact, you can incur foreign transaction fees even when you make an advance in U.S. Dollars. Finally, the ATM owner can also impose a fee for using its machine. (See also: The Best Credit Cards to Use While on Vacation)
By understanding all the costs of credit card cash advances, you can take steps to find less expensive ways to access cash.