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Business Credit Card Cash Advances Explained

You may be able to withdraw money at a cash machine using your business credit card, accessing what’s known as a cash advance. Generally speaking, it’s not advisable to make use of this feature with business credit cards… but if you need capital for your business, there are alternatives.

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Most business credit cards allow you to withdraw cash at a regular cash machine or ATM, just like a debit card or a personal credit card. This is called a cash advance.

But although it may seem like a convenient way to access cash in a hurry, using your business credit card to take out a cash advance can be an expensive way to borrow. 

Here, we explain how business credit card cash advances work, the costs and the alternatives.

What is a cash advance?

Withdrawing money from an ATM using your business credit card is called a cash advance. This is because your credit card provider is lending you money you will have to pay back.

Before you consider a cash advance, it’s important to know there are some key ways in which cash advances work differently from other purchases on your business credit card:

  1. You’ll be charged a cash advance fee: Typically, business credit card providers will charge you a cash advance fee of around 3% of the amount you withdraw, or a minimum of £3. So if you withdraw £200, you will be charged around £6. 
  2. There’s a higher rate of interest: Even if you have a business credit card with a low or 0% interest rate, this favourable rate is unlikely to apply to cash advances. Check your terms and conditions to find out exactly how much interest you will pay. 
  3. You won’t get an interest-free period: When you spend with a business credit card, you typically have up to 56 days to clear the balance before you are charged interest. With a cash advance, however, you won’t normally benefit from this interest-free period and will be charged interest from the moment you withdraw the money – even if you clear the balance before your next statement date.  
  4. It could impact your business credit score: Using a cash advance could indirectly hurt your business credit score, since you’ll be increasing your credit utilisation ratio (the amount of credit you’re using as a proportion of the amount of credit afforded to you). If you are unable to repay this extra debt, this is also likely to have an adverse effect on your business credit score. 

What counts as a cash advance?

It’s not just cash withdrawals that are viewed as cash advances. 

Although the rules vary between providers, the following are all likely to be classed as cash advances. This means they will also incur extra fees and a higher interest rate: 

How do business credit card cash advances work?

Getting a cash advance from a business credit card is fairly simple. If you want to take out cash from an ATM, you just need to insert your card and key in your PIN, just as you would when using a debit card. 

However, there’s usually a maximum limit that you can withdraw, which may be less than your available balance. This varies between providers, so check the terms and conditions. Some ATMs also have withdrawal limits, which are typically set at £300-£500 per day. 

You may also be able to use your business credit card for cash advances abroad. However, you will be charged an additional foreign exchange fee on top of your regular cash transaction fee and interest, so this is a particularly expensive option. 

Should I use a business credit card for a cash advance?

A cash advance is a quick and easy way to get your hands on short-term capital, so it can be tempting if you have to cover an unexpected expense. However, it’s an expensive way to borrow – and if you rely on it too often, it could indirectly impact your business credit rating. 

Generally speaking, you’d do well to avoid using your business credit card to access cash advances. When it comes to borrowing money, there are other options out there which will probably allow you to access capital on better terms.

If you do need a cash advance as a last resort, you should try to pay off the balance as soon as possible to minimise the amount you will pay in interest. 

Furthermore, make sure you take a close look at the cash advance rates and fees associated with your business credit card, and make sure you fully understand how much a cash advance is going to cost your business before you take one out. In all cases, never withdraw more cash than you can afford to repay. 

Alternatives to a cash advance

Before you take out a cash advance on your business credit card, it’s worth exploring other funding options:

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