A credit card cash advance (sometimes called a “cash loan”) allows credit card users to withdraw cash from a supported ATM with their physical credit card. The amount that can be withdrawn is typically a portion of the cardholder’s credit limit. These advances are often considered to be a useful way to address a variety of urgent cash needs.

To be clear, not all credit cards offer this feature, partly because of the elevated risks for card providers. Lending physical cash is riskier for credit providers since cash bypasses typical credit protections while also being harder to track. For these reasons, card providers that do offer cash advances will treat these transactions separately from regular credit card purchases.

For example, unlike typical credit card purchases, cash advances do not usually come with a grace period. They also often demand immediate service charges and higher interest rates that are applied the moment your funds are withdrawn. This makes cash advances a particularly expensive way to access physical cash.

When Should You Use a Credit Card Cash Advance? Important Considerations

As scary as those drawbacks sound, having an available cash advance credit card like the Landers Cashback Everywhere Credit Card by Maya provides a welcome financial cushion for cash-only situations that are still commonplace in the Philippines and even other countries like Vietnam, Thailand, and Japan. Despite the continued global rise in cashless payments, many establishments the world over still prioritize physical cash payments over emerging alternatives.

Taking all this together, this means that a cash advance can be a lifesaver when you’re traveling or when you have an emergency in a remote area. Especially important is how cash advances can give you access to local currency in whatever country you’re in, which will allow you to skip a visit to a forex dealer. Cash advances can also be faster and less awkward than applying for personal loans, making them a good choice when both speed and discretion are key.

Despite their convenience, a cash advance can make a serious dent on your finances if you’re not careful. Before you hit that ATM, ask yourself these important questions:

1. Is This Truly an Emergency?

Emergencies are ultimately somewhat subjective. However, if you’re not covering a medical emergency or some other legitimately urgent situation, you should probably refrain from using a cash advance.

2. Do I Have Other Options?

As the world moves to digital payments, physical cash-only emergencies are becoming increasingly rare. Even if you do come across one, a cash-only situation could often be negotiated so that you can pay with a digital wallet or some other means available to you.

Indeed, you may not even realize that you have options. For instance, if you have apps for popular food delivery, rideshare, or e-commerce shopping platforms, you may be able to use these for purchases and money transfers. If you’re overseas and need cash, you’ll be glad to learn that VISA and MasterCard debit cards are generally accepted in most local ATMs. You can also consider asking friends and family for a loan if the situation allows. Consider all these options before committing to the expense of a credit card cash advance.

3. Do I Understand the Costs Involved?

Speaking of expenses, virtually all cash advances come with immediate interest charges. Specific rates and fees differ among providers, but they are almost certain to be more expensive than a regular credit card transaction. Knowing the cost of your quick cash should help you assess whether it’s worth it.

4. How Fast Can I Repay the Advance?

Compounding interest will start working against you the moment you take out a cash advance. In other words, the longer you wait, the more you will have to pay. If you can’t repay the entire amount within a few weeks, skip the cash advance and look for an alternative.

5. What Is My Current Credit Card Balance?

If you’re already carrying a balance on your credit card, withdrawing a cash advance will increase your total debt and your credit utilization (the ratio of your card balance to your credit limit). Taking out too much will negatively impact your credit score, making it that much harder for you to secure loans in the future. This means that, if you have to withdraw a cash advance, it’s better to just take what you need and nothing more.

6. Is My Credit Card Near Its Limit?

Is your credit card close to its maximum limit? Taking a cash advance may result in declined transactions or over-limit fees, making a dire situation even worse. Make it a habit to check your balance regularly so you know if you have sufficient credit before proceeding. This applies not just to cash advances, but also to regular card transactions.

Cash Advances Are a Lifeline, Not a Lifestyle

Cash advances are nice to have on the credit cards you usually use, but they shouldn’t be depended on for trivial reasons. It’s useful to think of them as a supplement to your emergency funds, a helpful tool for serious emergencies that demand hard cash. After carefully considering the questions above, you should be able to figure out whether a cash advance makes sense in your situation.