Learn How Instant Cash Advance Fees Work Before You Borrow

Bibliometric Details: Issue No: 11 | Issue Month:November | Issue Year:2022

Let’s say you go to your bank or a direct lender and use your credit card to get an instant cash advance. At first, the process may seem similar to using a debit card for cash withdrawal. But it doesn’t. 

With a paycheck advance, you are borrowing cash from your credit limit at, not taking it out from your checking account. In other words, your lending provider is providing you with funds but charging your account for this. Most issuers charge a transaction fee and APR for cash advance transactions. However, the way costs are structured is different for each type and sometimes can be confusing.

It is essential to know how fees work before you borrow an instant cash advance. With a better understanding of them, you can save a few costs and make better decisions about paycheck advances, including when to avoid toxic offers or how to use them to your advantage.

Cash Advance Fees

The process of taking out a paycheck advance can be done via ATM or through convenience checks your lending provider sends in the mail. In both cases, your credit card company will make money off the transaction by charging a fee each time you borrow money against your credit limit.

Here are a few costs usually associated with instant cash advances:

  • Transaction fee: this covers costs associated with your instant cash advance. You need to pay a transaction fee for the process of taking money out from your account.
  • Cash-equivalent transaction fee: some credit card issuers can make money off the transactions treated like paycheck advances, including overdraft protection, a money order purchase, a reloadable gift card, or sending money to another person.
  • APR: most providers charge a yearly flat fee for the privilege of using their cards.
  • No grace period: cash advances usually start accruing interest on the same day you make the transaction, meaning there is no grace period as it is with credit card purchases.

If you have questions about your cash advance fee, you should review your agreement or contact the bank customer service by calling the number on the back of your credit card. Also, you can get answers to your banking questions at by navigating Fees & Terms in their help topics. Knowing how the fees are generated before you take out an instant cash advance will help you be more prepared for possible costs.

How Much Is a Paycheck Advance Fee?

There is no universal formula that can be applied to all lending providers when it comes to calculating a cash advance fee amount. But in general, the cost depends on the amount of your allowance and the method your credit card company uses to calculate the fee.

Most providers charge either a flat fee or a percentage of the advance amount, whichever is more profitable for them. For instance, a typical credit card advance fee is greater than $10 or 5% of the amount borrowed. So, if you want to borrow $100 under these conditions, you will be charged $10 in fees, since 5% of $100 is only $5. On the other hand, if you want to borrow $300, your paycheck advance fee would be $15.

How to Lower Advance Fees

Even though you can’t avoid the transaction completely, you can minimize the paycheck advance fee you pay by considering the following tips.

Understand your Amount

Depending on the cash amount, paycheck advance fees can be a flat rate or a percentage of the overall advance. For example, if your lending provider charges a combination of a flat rate, you will minimize the transaction fee by taking all the cash you think you will need at once. 

On the other hand, if transaction fees are a percentage of the overall advance, it is better to reduce the amount of cash you withdraw on your credit card and make multiple smaller transactions.

Pay it Off Fast

As we have said earlier, cash allowances, unlike card purchases, offer no grace period and begin accruing fees immediately after transactions. That’s why paying off early or before the due date is crucial in the long run.

Since interest rate starts increasing right away on a paycheck advance, paying your money back quickly will reduce the overall cost of the credit. Be careful when taking short-term loans and make sure you can make payments on them in advance.

Find a Lender With Better Offers

Last but not least, it is worth reviewing different companies and their credit services until you find an offer that suits your needs best. Pay close attention to a card with lower instant cash advance fees, more affordable interest rates, and flexible monthly payments.

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