I Use My Credit Cards for Everything but I'd Never Do This

I'm a huge proponent of using credit cards. I charge every purchase I possibly can on my rewards cards so I can benefit from purchase protections and cash back. I firmly believe credit cards are a great tool rather than something to be feared -- as long as you can spend responsibly.

That being said, there's one thing I absolutely would never do with my credit card. Here's what it is.

A cash advance is off the table for me

Although I'm comfortable charging a ton of stuff on my credit card, I would never take a cash advance on my cards.

A cash advance is essentially a loan that is made by your credit card company. But unlike a typical personal loan, you wouldn't have to apply for it. You'd just request a cash advance if your card offers one and obtain the requested funds (up to the card's allowable limit) via a convenience check, ATM withdrawal, or at a bank branch (depending on which options your card offers).

Cash advances can seem like a quick and easy way to get money. But they aren't. They are an extremely expensive way to get access to funds. My card issuer charges up to 29.24% APR for a cash advance and charges between 4% and 5% of the amount of the cash advance transaction, depending on whether it is a same-day cash equivalent cash advance or not. Many other card issuers impose similar fees.

That makes the interest rate even more expensive than the standard rate on a credit card, which is already pretty high. And it also means paying a huge amount of money upfront just for the privilege of getting the cash advance. A $1,000 cash advance would come with a fee of as much as $50 upfront, even before getting hit with that high interest rate.

Incurring such high costs simply doesn't make sense to me when there are cheaper ways to borrow.

Alternatives to a credit card cash advance

If you are considering a cash advance, you shouldn't move forward with doing it until you have explored all of your other cheaper options. Some other potential ways to borrow could include the following.

A 0% APR credit card

If you can use your credit card to just charge whatever items you need to buy, this can be cheaper than taking a cash advance. And if you can qualify for a card offering a 0% introductory rate on purchases, you may be able to pay no interest for a while rather than getting hit with a very high APR like you would with a cash advance.

You can find some great 0% APR cards online to choose from and can often apply for your card online as well. And there are third-party services such as Plastiq that can make it possible to pay for things with a credit card even when a card isn't typically accepted. You'll pay a fee but it may be less than the cash advance fee in many cases.

A credit card loan program

Some credit card companies offer more affordable ways to access cash from your credit line when you can't charge something you need and don't want to take out a cash advance.

For example, a Citi® Flex Loan could offer you a more affordable way to borrow. You can find out if your card offers this option, and what terms it offers, by signing into your online account with your card issuer.

A personal loan

A traditional personal loan can be a much more affordable option than a credit card cash advance. The average interest rate on a personal loan was 11.48% as of May 2023, so you could more than cut your interest rate in half compared to the typical cash advance APR.

You can apply for a personal loan online and will need to specify how much you're borrowing as well as pick your repayment terms to find out if this option is affordable.

The bottom line is there are alternatives to a cash advance and generally, there is very little reason to opt for this expensive method of borrowing. If you are considering a cash advance to cover a pressing expense, look into these other options today to see if one will work better for you.

Of course, it's best not to have to rely on borrowed funds for unexpected expenses. Having an emergency fund can save you from that fate. But, not everyone has emergency savings so if you need money now, looking into these options can save you from the high fees that a cash advance comes with.