what is a cash advance 
a cash advance is a short term loan from a bank or an alternative lender the term also refers to a service provided by many credit card issuers allowing cardholders to withdraw a certain amount of cash against their available credit cash advances generally feature steep interest rates and fees but they are attractive to borrowers because they also feature fast approval and quick funding types of cash advancesthere are a variety of cash advance types and lenders but the common denominators among all of them are the stiff interest rates and fees the most popular type of cash advance is borrowing on a line of credit through a credit card the money can be withdrawn at an atm or depending on the credit card company from a check that is deposited or cashed at a bank credit card cash advances typically carry an interest rate that is higher than the rate for regular purchases what s more the interest begins to accrue immediately there is no grace period 1these cash advances usually include a fee as well either a flat rate or a percentage of the advanced amount additionally if you use an atm to access the cash you often are charged a small usage fee along with separate interest rates credit card cash advances carry a separate balance from credit purchases but the monthly payment can be applied to both balances however if you are only paying the minimum amount due the card issuer is allowed by federal law to apply it to the balance with the lower interest rate as that is invariably the rate for purchases the cash advance balance can sit and accrue interest at that high rate for months any payments over the minimum payment must be applied to the highest interest balance so if possible paying more than the minimum is advisable 2in most cases credit card cash advances do not qualify for no or low interest rate introductory offers on the plus side they are quick and easy to obtain merchant cash advances refer to loans received by companies or merchants from banks or alternative lenders 3 typically businesses with less than perfect credit use cash advances to finance their activities and in some cases these advances are paid for with future credit card receipts or with a portion of the funds the business receives from sales in its online account rather than using a business credit score alternative lenders often survey its creditworthiness by looking at multiple data points including how much money the merchant receives through online accounts like paypal in consumer lending the phrase cash advance can also refer to payday loans issued by special payday lenders loans can start anywhere from 1 000 to 50 000 but they come with fees typically around 15 per 100 borrowed and interest rates exceeding 100 4 rather than taking into account the borrower s credit score the lender determines the amount of the loan based on local state regulations and the size of the applicant s paycheck if the loan is approved the lender hands the borrower cash if the transaction takes place online the lender makes an electronic deposit to the borrower s checking or savings account the loans are extremely short term they must be paid back on the borrower s next payday unless they wish to extend the loan and in that case additional interest is charged unfortunately many do more than 80 of all payday loans are rolled over within 30 days of the previous loan according to a 2014 study by the consumer financial protection bureau cfpb 5payday loans are only legal in 26 states and of those 16 states require lenders to offer extended payment plans that help mitigate the excess rollover fees however many payday lenders don t advertise these payment plans instead hoping that borrowers will rack up excessive fees 6the process can be quicker if more complex than securing a credit card cash advance to obtain a payday loan you write a postdated check made out to the payday lender for the amount you plan to borrow including the fees the lender immediately issues the borrowed amount but waits to cash your check until payday arrives some electronically minded lenders now have borrowers sign an agreement for automatic repayment from their bank accounts lenders usually ask that you provide personal identification and proof of income when you apply some employers offer payday loans or advances on paychecks as a service to their employees terms vary but often no fees or interest are charged a cash advance can be helpful to someone who needs cash fast and has a solid plan for paying it back quickly but cash advances can be disastrous if the borrower is about to declare bankruptcy needs to pay off a credit card or other bills that have interest rates or just wants the money to buy more products 