What is a Credit Card Cash Advance? How it Works?

Ever had one of those days where your wallet’s on life support and an unexpected expense crashes the party? Maybe your laptop dies mid-deadline, or your fridge gives up in summer, and you are in desperate need of cash. You check your savings…crickets. That’s when your credit card steps in and says, “I've got you”.

That magical feature is called a credit card cash advance. Basically, your card hands you cold, hard cash instead of just paying merchants. Sounds like a lifesaver, right? Well, sort of. But there’s a catch: it’s one of the priciest favours your card can do. Think instant fees, sky-high interest from day one, and no reward points to cushion the blow.

In this guide, we’re laying it all out: what a cash advance really is, how it works, how much it actually costs, and the risks that come hidden in fine print. 

The goal? To help you figure out whether it’s a quick fix worth using or just financial quicksand dressed as convenience.

Table of Contents

• What is Credit Card Cash Advance?
• How to Get a Cash Advance Using a Credit Card
• What is a Cash Advance Fee on a Credit Card?
• Comparing Cash Advance Fees: Major Indian Banks
• Calculating the Cash Advance Charge on a Credit Card
• Finding the Best Cash Advance Credit Card: What to Look For
• What Credit Card Gives the Most Cash Advance?
• How Cash Advances Impact Your CIBIL Score

What is a Credit Card Cash Advance?

So, what exactly is a credit card cash advance? Simply put, it is when you withdraw actual cash using your credit card. You are borrowing money directly from your bank, using your card’s available credit limit. Think of it as a short-term loan handed to you instantly. 

This is very different from how your credit card usually works. When you swipe your card to make a purchase, the bank pays the seller, and you get a grace period to repay the amount without interest.

With a cash advance, you are taking money directly, not buying anything. Because of that, the usual credit card benefits do not apply. Here is what changes:

• There is no interest-free grace period
• Interest starts building from the day you withdraw
• There is a cash advance fee on top of the interest
• You earn no reward points on this transaction

So while it can help in an urgent situation, it comes at a high cost. Knowing the difference helps you decide when using this feature is smart and when it is better to avoid it.

How to Get a Cash Advance Using a Credit Card

Taking out cash using your credit card is known as a cash advance. It is surprisingly simple to do. That is part of what makes it appealing in emergencies, but also risky. Cash advances come with high fees and interest charges that begin right away.

Here is how you can get a cash advance using your credit card:

At an ATM

This is the most common method. Your credit card can be used at an ATM just like a debit card to withdraw cash.

• Visit any bank's ATM.
• Insert your credit card into the machine.
• Enter your credit card Personal Identification Number (PIN).
• Select the "Cash Advance" or "Cash Withdrawal" option.
• Enter the amount you wish to withdraw and collect your cash.

At a Bank Branch

You can also walk into a branch of your credit card issuing bank and request a cash advance over the counter.

• Visit the bank branch with your credit card and a valid photo ID for verification.
• Speak to a bank teller and request a cash advance on your credit card.
• The teller will process the transaction, and you'll receive the cash. This method is useful if you need an amount larger than the daily ATM withdrawal limit.

Using "Convenience Cheques"

This is a less common method today, but it still exists with some card issuers. Your bank might send you special cheques linked to your credit card account.

• You can write a cheque to yourself or someone else.
• When the cheque is cashed, the amount is treated as a cash advance.
• The funds are debited from your credit limit, and all associated cash advance fees and interest rates apply immediately.

The table below gives a quick comparison of the most common methods, how they work, and what to keep in mind with each one.

Method	How It Works	Key Points
At an ATM	Use your credit card at any ATM to withdraw cash	Most common method Needs credit card PIN Subject to daily withdrawal limit
At a Bank Branch	Visit your credit card issuing bank and request cash at the counter	Useful for larger amounts Requires a valid photo ID Face-to-face process
Using Convenience Cheques	Use special cheques linked to your credit card account	Less common today Works like writing a cheque Fees and interest apply immediately

These methods, including the potential for an online credit card cash advance through fund transfers offered by some banks, make accessing cash quick but also deceptively easy.

What is a Cash Advance Fee on a Credit Card?

Here’s where we get to the crux of the matter. A credit card cash advance is far from a free service. The convenience comes at a steep price, broken down into several charges. Understanding what are cash advance fees on credit cards will make you think twice before heading to the ATM.

The Upfront Credit Card Cash Advance Fee

The moment you withdraw cash, your card issuer levies a one-time transaction fee. This is the primary cash advance fee.

• This fee is typically calculated as a percentage of the amount you withdraw, usually between 2.5% to 3.5% in the Indian market.
• Crucially, there's almost always a minimum flat fee. This fee, often around ₹500, is charged if the percentage calculation comes out to be lower.
• For example, on a ₹5,000 withdrawal with a 2.5% fee, the charge would be ₹125. However, since the minimum fee is ₹500, you would be charged the higher amount. This makes small cash advances particularly expensive.

High Credit Card Cash Advance Rates (APR)

This is the most damaging part of the cash advance cost. The interest rate, or Annual Percentage Rate (APR), on a cash advance is significantly higher than the rate for regular purchases.

• While your purchase APR might be around 18-24% per annum, credit card cash advance rates can soar to 30-45% per annum.
• The most critical point is that interest starts accruing from the very first day. There is absolutely no grace period or interest-free window.
• This immediate interest calculation means that even if you pay the amount back in a few days, you will still owe interest for that period, on top of the initial cash advance charge.

Curious how APR differs from monthly interest and why it matters for cash advances? This APR on credit cards breakdown will help clarify.

Other Potential Charges

On top of the issuer’s fees, you might face other costs.

• ATM fees: If you use an ATM from a different bank, that bank may levy its own service charge for the transaction.
• GST: All fees and interest charges on your credit card, including the cash advance fee for credit card, are subject to Goods and Services Tax (GST) at the prevailing rate, which is currently 18%.

When you combine the upfront credit card cash advance fee, the sky-high immediate interest, and other potential charges, the true cost becomes alarmingly high.

Comparing Cash Advance Fees: Major Indian Banks

To put things into perspective, let's look at the standard fees offered by some of the major banks in India. This table illustrates the typical cash advance fee in credit card statements.

Bank	Cash Advance Fee (as a % of amount)	Minimum Fee	Approx. Interest Rate (per month)
HDFC Bank	2.5%	₹500	Up to 3.6%
ICICI Bank	2.5%	₹500	Up to 3.4%
SBI Card	2.5%	₹500	Up to 3.75%
Axis Bank	2.5%	₹500	Up to 3.6%
Kotak Mahindra Bank	2.5%	₹500	Up to 3.75%

(Note: These figures are illustrative as of July 2025 and subject to change. They are based on standard credit cards and can vary for premium cards. Always check the latest terms and conditions directly with your bank.)

As you can see, the transaction fee is quite uniform across major players, but the real pain point is the monthly interest that kicks in instantly. A rate of 3.5% per month translates to a staggering 42% per year.

Calculating the Cash Advance Charge on a Credit Card

Let's walk through a practical example to illustrate the real cash advance charge on credit card usage.

Imagine you're in a bind and decide to withdraw ₹20,000 using your credit card. Your bank charges a cash advance fee of 2.5% or ₹500 (whichever is higher) and an interest rate of 3.5% per month.

1. Instant fee calculation:
   1. 2.5% of ₹20,000 is ₹500.
   2. Since this matches the minimum fee, a cash advance charge of ₹500 is immediately added to your outstanding balance.
   3. GST at 18% on this fee is ₹90.
   4. Your new balance is now ₹20,590 even before interest starts.
2. Immediate interest accrual:
   1. Unlike a regular purchase, interest begins to build on the ₹20,000 from day one.
   2. Let's say you manage to pay the entire amount back after 30 days. The interest for one month would be: (₹20,000 * 3.5%) = ₹700.
   3. GST at 18% on this interest is ₹126.
3. Total cost calculation:
   1. Total amount to repay: ₹20,000 (principal) + ₹500 (fee) + ₹90 (GST on fee) + ₹700 (interest) + ₹126 (GST on interest) = ₹21,416.

In just one month, borrowing ₹20,000 has cost you ₹1,416. This example clearly shows how quickly the cash advance on credit card can become an expensive liability.

Finding the Best Cash Advance Credit Card: What to Look For

While we strongly advise against using cash advances, you might still want to have this option for absolute, unavoidable emergencies. If you are actively looking for a credit card for cash advances, the "best" card is the one that minimises the damage.

The best cash advance credit card is not the one with the highest limit, but the one with the lowest associated costs. Here’s what to compare:

• Lower cash advance fee: Look for cards that might have a slightly lower transaction fee percentage or a lower minimum flat fee. While rare, some premium or specific cash advance cards might offer better terms.
• Lower APR for advances: This is the most important factor. A card that charges a lower interest rate on cash advances will save you a significant amount of money. Check the fine print for the specific cash advance APR.
• Higher cash limit: If you anticipate needing this feature, a card that offers a higher percentage of your credit limit as a cash limit gives you more flexibility. However, this is a double-edged sword, as a higher limit can also lead to deeper debt.

An immediate cash advance credit card is essentially any activated credit card with a set PIN. The focus should always be on the cost, not just the availability of the funds.

What Credit Card Gives the Most Cash Advance?

This is a common question, but the answer isn't about a specific card brand. The amount of cash you can withdraw is not unlimited; it's determined by your "Cash Limit" or "Cash Advance Limit."

• This limit is a specific sub-limit within your total credit limit.
• Typically, banks set the cash advance limit to be a percentage of your total credit limit, usually ranging from 20% to 40%.
• For example, if your total credit limit is ₹2 lakh and your cash limit is 30%, you can withdraw up to ₹60,000 in cash.

Therefore, the answer to "what credit card gives the most cash advance?" is simple: the card with the highest overall credit limit assigned to you. A premium card with a ₹10 lakh limit will naturally offer a higher potential cash withdrawal amount than a basic card with a ₹50,000 limit. You can find your specific cash limit in your monthly statement, on your net banking portal, or by calling your bank's customer service.

How Cash Advances Impact Your CIBIL Score

Beyond the immediate financial cost, a credit card cash advance can have a subtle but negative impact on your CIBIL score. This impact is usually indirect.

• Credit Utilisation Ratio (CUR): Your CUR is the percentage of your total credit limit that you are currently using. A cash advance instantly increases your outstanding balance, thus raising your CUR. Lenders prefer a CUR below 30%, and a high ratio suggests you are over-reliant on credit, which can lower your score.
• Sign of financial distress: While a single cash advance for a true emergency is unlikely to cause major damage, frequent use of this facility sends a red flag to credit bureaus and potential lenders. It can be interpreted as a sign of poor financial management or that you are facing financial hardship, making them more hesitant to approve new loans or credit cards for you in the future.

This is a crucial aspect of the “what is cash advance" question. It’s not just a transaction; it's a behaviour that financial institutions monitor.

Conclusion

A credit card cash advance is a powerful but dangerous financial tool. It offers unparalleled speed and convenience when you need cash urgently. You don't need approvals or paperwork; you just need your card and a PIN.

However, this convenience is overshadowed by its exorbitant costs. The combination of a high upfront fee and punishingly high interest rates makes it one of the most expensive forms of debt available. It should be treated as a last resort, reserved for only the most genuine and short-lived emergencies.

Before taking on a cash advance, make sure your credit card is actually working for you, not against you. The right card can offer better features, lower costs, and more flexibility when it matters most.

That’s why we’ve reviewed over 90+ of India’s top credit cards with zero sales fluff, just clear pros and cons, fees, features, and a verdict that tells you if the card suits your needs or not.

We’ve done the hard work, so your credit card choice is easier. You’ll find it all in one place: Finology Select.

Want to learn how interest quietly accumulates on unpaid cash advances? This detailed credit card interest rates guide can help you stay ahead.

FAQs

What is the difference between using a debit card and a credit card for cash withdrawal?

When you use a debit card, you are withdrawing your own money from your linked bank account. There is usually no fee if you use your own bank's ATM. When you use a credit card, you are borrowing money from the bank, which constitutes a loan and attracts a high cash advance fee and immediate interest.

How soon do I have to pay back a cash advance on my credit card?

You should pay it back as soon as humanly possible. Interest on a cash advance using credit card starts accumulating from the day of the transaction. The longer you wait, the more interest you will pay.

Will I be charged a cash advance fee for every withdrawal I make?

Yes. The credit card cash advance fee is charged per transaction. If you make two separate withdrawals, you will be charged the fee twice.

Can I get an immediate cash advance with a new credit card in India?

Yes, as long as your new card is activated and you have set a PIN for it, you can get an immediate cash advance credit card facility. However, your cash withdrawal limit might be lower initially.

How can I find out the exact cash advance charge on my credit card?

You can find the specific cash advance charge on credit card in the "Most Important Terms and Conditions (MITC)" or the schedule of charges document provided by your bank. It is also available on the bank's official website.

Are there any credit cards in India with low cash advance fees?

While most standard cards have similar high fees, some premium or super-premium cards might offer slightly better terms. However, the service is designed to be expensive across the board. The best cash advance credit card is the one you don't have to use.

Does taking a cash advance mean I am in financial trouble?

A single, isolated instance does not automatically mean you are in trouble. However, regular or repeated reliance on cash advances can be seen by lenders as a strong indicator of financial distress, potentially affecting your future creditworthiness.

What is the maximum cash on advance I can get from my credit card?

The maximum amount, or your "Cash Limit," is a pre-set percentage (typically 20-40%) of your total credit limit. You can find this specific amount detailed in your monthly credit card statement or on your internet banking portal.