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Taking out a cash advance on your credit card can sound appealing: You get easy access to money, which you might need to buy groceries or pay rent.
But there are also significant downsides to cash advances, including fees but also interest, which tends to be high and starts accruing immediately. There’s also often a cap on how much you can take out, and generally it's much lower than your card's overall credit limit.
Still, as expensive as a cash advance is, it does exist as a potential last resort if you are in need of necessities — and it's a better option than, say, taking out a payday loan. But here are some alternatives you might want to consider first.
Low-interest or 0% intro APR credit cards
Some credit cards offer 0% intro APR periods on purchases, meaning you could use them to finance the purchase of groceries and other essentials without paying exorbitant interest upfront. Of course, you'll still owe the money, but you'll have a long period of time — often ranging from six months to nearly two years — to pay it back in full before any ongoing interest kicks in.
With the Wells Fargo Platinum card, for example, you can take advantage of an intro 0% APR for 18 months on purchases and qualifying balance transfers, and then the ongoing APR of 15.49% - 24.99% Variable APR
Other cards offer low interest rates on purchases only: The Chase Freedom Unlimited® offers 0% intro APR on Purchases for 15 months, and then the ongoing APR of 14.99% - 23.74% Variable APR
Flexible offers from your existing cards
Usually, to qualify for a 0% intro APR credit card, you'll need good or excellent credit (generally a FICO score of 690 or higher). But some cards offer such 0% deals to existing, longtime customers, meaning you may not need to apply for a new card. Check your account online periodically for such promotions.
Also, during the COVID-19 pandemic, many credit card issuers are offering other flexible payment options to consumers, such as deferral of minimum payments, waived late fees and credit line increases. This can help free up cash for other necessities. In many cases, cardholders need to call their issuer and ask for this help first.
Credit card loan programs
Some credit card issuers offer loans to existing customers, such as AmEx’s Pay It Plan It feature, which among other things allows you to move certain purchases to an interest-free installment plan to pay off over time, for a fee. That could end up being cheaper than carrying a balance and paying interest.
Similarly, Citi offers a Citi Flex Loan and Chase offers My Chase Plan and My Chase Loan. The programs allow customers to borrow money at a lower rate than what comes with cash advances, then to pay it off over time.
Lenders offer many types of personal loans, including secured loans, which are backed by collateral, and unsecured loans, which aren't. Some come with fixed rates, which means you pay the same amount every month until the loan is paid off, while others offer variable rates, which means your payments can change over time. Rates generally vary from 5% to 36%.
While the interest rate is still relatively high, it can be lower than a cash advance, especially after you consider the other cost involved in taking out a cash advance, which is typically a flat fee or a percentage of the amount withdrawn.
Third-party payment services
If you need to buy some time before your next paycheck, you could consider a service like Plastiq to tackle some bills. The site allows you to use a credit card to cover expenses that often aren't otherwise payable that way, including rent, utilities, day care, etc. For a 2.85% service fee, Plastiq will charge your card for the bill, make out a check to the vendor in your name, then mail it to them.
Assuming you can pay off the bill quickly — that is, without carrying it over to the next month and getting hit with your credit card's double-digit interest rate — a 2.85% convenience charge may be worth it and can be cheaper than other options. If you use a rewards credit card for the bill, it can help defray that upfront fee.