When you take out a cash advance from your credit card, you are simply borrowing against your credit card balance. The amount you can take out with a cash advance is usually determined as a percentage of your overall credit limit.

If you’re stuck and need cash quickly, your credit card can save the day. However, you should be aware of the downside of using cash advances in this way.

Things to be aware of when using credit card cash advances:

• Interest Free Period – The normal interest free periods that you are offered on your purchases, DO NOT apply to cash advances. You will start paying interest on this amount from the day you withdraw it.
• Interest Rate – The interest rate you will pay on a cash advance is in most cases substantially higher than your standard interest rate. In some cases, it is 8 to 10 percent higher. The most common interest rate for a cash advance is around 20 percent. This means, if you were to take a cash advance of $1,000, the interest you would pay is $200 per year.

Whilst credit card cash advances can be convenient, we should use them only in an emergency and not make a habit of sourcing cash in this way.