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I just got my first credit card. I haven't spent anything on it but I see that the Cash Advance APR is 27.5%.

Can someone tell me in layman terms what this means?

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    Some credit cards also supply checks as well that can be used to draw a Cash Advance on the card. My American Express card sends me such checks about twice a year in the mail, which I promptly shred. They're covered in marketing promotion to make them seem like a better deal than normal Cash Advances, but I added up their delayed interest totals and the dates and the fee to use the check, and it turned out to be exactly the same APR rate for 1 month, and worse if left more time unpaid. I'm of Quid's opinion that such advances should simply never be used. – Davy M Mar 23 at 23:45
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A "cash advance" is when you use your credit card in such a way that you receive cash. For example, if you use your credit card in an ATM machine and receive cash.

You should never ever use your credit card for a cash advance.

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    Right, never take cash. The interest rate as you can see is awful, there is no grace period, so interest begins accruing immediately. MAYBE if you were being robbed and literally had a gun to your head, it would be worth it, otherwise don't even think about it. – quid Mar 21 at 20:11
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    @Raj oh! You've had debit cards in the past and noticed they have a cashback feature. Yeah, that's a debit card thing. Credit cards don't support that. But if they did, then yeah, that would count as a cash advance and pay that interest rate. – Harper Mar 21 at 21:07
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    @Harper while that may be true for most credit cards, it is not the case for Discover. It even uses the purchase APR (discover.com/credit-cards/member-benefits/…) – clcto Mar 21 at 21:09
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    This might be slightly too strong. I've used my credit card for this purpose when my debit card (from the same bank) broke. Initially, my bank charged its standard fee, but they waived it when I pointed out why I needed to use my credit card. It probably did help that I also used the bank's own ATM. – MSalters Mar 22 at 8:57
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    I've used a CC to access cash while travelling abroad. Provided I go pay the balance same-day via online banking (or even apply a positive balance in advance), it can be cheaper than paying extra fees to draw using my debit card at a foreign bank. Often the currency conversion rates are better, too. – Kyle Mar 22 at 9:38
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A cash advance from a credit card is either using the card to get cash from an ATM, or sometimes you get checks that you can use. Any outstanding balance on these transactions will accrue interest at 27.5% annually.

The big downsides with these cash advances they begin accruing interest immediately, not after balance due date like normal credit card purchases. So there's no avoiding interest with a cash advance.

Best to avoid cash advances. Also, ideally you always pay off your statement balance each month to avoid any interest payments.

Edit: Removed out-dated info regarding cash advance portion being paid after regular credit card purchases, Credit Card Accountability Responsibility and Disclosure Act of 2009 eliminated this practice in 2010, and now payment in excess of minimum gets applied to highest interest rate first.

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    These cards accruing interest immediately wildly depends on the country you are in. – glglgl Mar 22 at 10:14
  • I don't have enough rep to answer but also check of the order payments are used. any payments you make may pay off purchases (which aren't accruing interest yet) before the cash advance is repaid. So you buy some item for £50, get a £20 advance, if you repay £20 it may be used to replay the currently interest free item, and your cash advance continues to accrue interest. – WendyG Mar 22 at 20:07
  • @WendyG: The minimum payment may be allocated that way, but in the USA the CARD Act (law) requires that any payments above the minimum have to be applied to the balance with the highest interest rate first. – Ben Voigt Mar 22 at 22:13
  • @BenVoigt cool for Americans BUT we don't know where in the word this person lives. And even if he is american in my example that still leaves you £3.50 left accruing interest on your cash advance, which could be a surprise. – WendyG Mar 25 at 9:58

protected by JoeTaxpayer Mar 21 at 20:59

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