Managing money can be tricky, overwhelming, and exhausting, especially when unexpected expenses pop up. This can happen to anyone, including business owners, independent contractors, and gig workers. If that sounds like you, chances are you’ve dealt with a fluctuating income, needed quick cash to cover bills, or wished you had an emergency fund.
If you have a credit card, you’ve probably seen the cash advance option, where you can borrow money from your credit limit. It might seem like an easy fix, but is it the best choice?
In this guide, we’ll break down everything you need to know about cash advances—what they are, how they work, and when they might (or might not) be a good idea. We’ll also explore alternatives so you can make the best financial decision for your situation.
What Is a Cash Advance?
A cash advance is a short-term borrowing option that gives you quick access to money using your credit card. But they do come with a catch, including higher fees and interest rates that start accumulating right away.
How to Get a Cash Advance from a Credit Card
You have three primary ways to access the money for a credit card cash advance. Each method has its own advantages and drawbacks.
Cash Advance via ATM
One of the most convenient ways to get a cash advance is through an ATM. If your credit card allows it, you can withdraw cash just like a debit card.
How It Works:
- Insert your credit card into an ATM.
- Select the “Cash Advance” or “ Cash Withdrawal” option.
- Choose “Credit” if necessary as some let you choose between credit, debit, and checking.
- Enter the amount you need.
- Confirm the transaction and withdraw your cash.
Cash Advance via Convenience Checks
Some credit card companies send convenience checks that allow you to withdraw cash or make payments that aren’t usually possible with a credit card.
How It Works:
- You receive a set of pre-approved checks from your credit card company.
- You fill out a check, either to yourself (for cash withdrawal) or to pay someone directly.
- The amount is deducted from your available credit, just like a regular cash advance.
In-Person Cash Advances
Another way to get a cash advance is by visiting a bank or the credit card issuer's branch.
How It Works:
- Bring your credit card and ID to the bank.
- Request a cash advance from the teller.
- The bank provides you with cash, deducting the amount from your credit card.
Why Do People Use Cash Advances?
Cash advances can be a lifesaver whenever in a pinch, but they’re definitely not without their downsides. People usually turn to cash advances when life throws them a curveball, and they don’t have the money readily available to deal with it. Here are some of those scenarios:
1. Emergency Expenses
Life is super unpredictable, right? You can be doing great one day, and then bam! You need cash for something urgent. An instant cash advance can give you that quick relief, even if your savings account isn’t quite ready for an emergency.
Here are some examples:
- Medical Bills
Let’s say you or a loved one need some sudden medical care, and your insurance doesn’t cover everything. You need money fast, and a cash advance might help cover the gap. - Car Repairs
Your car breaks down, and you can’t wait for your next paycheck. If you need it fixed fast, a cash advance could help you get back on the road.
- Home Repairs
A broken water heater, leaky roof, or sudden plumbing issue can be expensive to fix right away. If you don’t have the savings to cover it, a cash advance could help you handle the cost.
2. Temporary Cash Flow Gaps
If you’re a freelancer, gig worker, or independent contractor, you know how unpredictable your income can be. It’s tough to juggle things like bills and expenses when your paycheck isn’t guaranteed. A cash advance can come to the rescue during those tricky moments, like:
- Delayed Client Payments
You’ve done the work, but the payment is taking longer than expected. Meanwhile, you still have bills to pay. A cash advance can bridge the gap and give you the funds you need to stay on top of your expenses. - Slow Business Weeks
Whether you're driving for Uber, delivering for DoorDash, or freelancing, some weeks are slower than others. A cash advance can help cover those slower periods until things pick back up. - Bills Due Before Payday
If you have rent, utilities, or other bills that will need to be paid before your next check arrives, a quick cash advance can help bridge that gap.
3. Business Needs
If you run your own business, you already know that cash flow can get tight—even when business is good. Traditional loans can take weeks to get approved, and waiting on the bank isn’t an option when you need funds fast. That’s when many business owners turn to an instant business cash advance.
Here are a few reasons to use an instant business cash advance:
- Restocking Inventory
Say you run a store and sell out of a popular item but don’t have the cash to restock. A cash advance can help you reorder quickly so you don’t miss out on sales.
- Unexpected Costs
Unexpected costs happen—equipment breaks, tools need replacing, or a last-minute shipping fee pops up. When these expenses hit your budget, a cash advance can give you the quick boost you need to keep things on track.
- Payroll
As a business owner, paying your team on time is a priority, but cash flow doesn’t always cooperate. If funds are running low, a cash advance can help you cover payroll and keep things running smoothly.
Things to Think About Before Taking a Cash Advance
A credit card cash advance can feel like a quick fix when you’re in a pinch, but it’s important to weigh the costs and risks before hitting that ATM or writing a convenience check. Here’s what you need to keep in mind before taking the plunge.
1. Check Your Credit Card Terms
Different credit card issuers have different rules, fees, and interest rates. So, before taking out a cash advance, here’s what you need to look out for:
- Cash Advance Fees
Some credit card companies charge a flat fee (e.g., $10 per transaction), while others take a percentage of the amount you withdraw (typically 3% to 5%). That means if you withdraw $500, you could be charged a $25 fee. - Higher Interest Rates
Cash advances usually come with a much higher interest rate than regular credit card purchases. While your card might have a 15-20% Annual Percentage Rate (APR) on purchases, a cash advance could have an interest rate above 29%. - No Grace Period
Unlike regular purchases, which usually come with a grace period, cash advances start charging interest right away—from the moment you withdraw the money.
- Lower Withdrawal Limits
Your credit card may have a separate, lower limit for cash advances than your overall credit limit. Even if you have a $10,000 credit limit, your cash advance limit might only be $1,000.
2. Consider the Amount Carefully
A cash advance might seem like a quick fix for urgent expenses, but it’s not free money—it’s a loan, and often one with some of the highest interest rates. That’s why it’s important to only take what you truly need. The more you borrow, the more you’ll owe in fees and interest.
If you only need $200, don’t take out $500 just because it’s available. Instead, explore other funding options designed for independent contractors, gig workers, and small business owners—options that won’t drain your wallet.
3. Know How It Impacts Your Credit
Many people don’t realize that a cash advance can have a negative impact on their credit score.
Here’s why:
- Increased Credit Utilization
Your credit utilization ratio (the amount of credit you’re using compared to your total available credit) plays a big role in your credit score. Since cash advances count toward your balance, they can drive up your utilization rate, which may lower your credit score. - Higher Debt Burden
If you already have a balance on your credit card, a cash advance can make it harder to keep up with payments, especially because of its high interest rate. - Business vs. Personal Credit Impact
If you’re a small business owner using a business credit card for a cash advance, it could hurt your personal credit score, making it harder to qualify for business financing in the future.
Is a Cash Advance the Right Move?
At the end of the day, a cash advance can be useful in emergencies—but it’s not a long-term solution. If you’re in a bind and need quick cash, it’s important to weigh the costs and consider whether there are better alternatives.
If you’re a gig worker, independent contractor, or small business owner looking for financial support without the stress of high fees, Giggle Finance has your back. We offer flexible funding options designed specifically for people like you—without the outrageous interest rates, hidden fees, or credit requirements that come with traditional cash advances.
If you need a short-term boost to cover expenses, invest in your business, or create a financial breathing room, we’re here to help. Explore your options today and take control of your finances with Giggle Finance. Apply today to get funded right away!
Frequently Asked Questions
Will a Cash Advance via Credit Card Hurt My Credit Score?
Yes, it can. Cash advances increase your credit utilization, and if you don’t pay them off quickly, the high interest can make it harder to manage your debt.
What Happens If I Don’t Pay Back a Cash Advance?
Missed payments result in late fees, higher interest, and potential credit score damage. If left unpaid, the debt could go into collections, making it even harder to recover financially.
Should Business Owners Use Cash Advances?
Business owners should consider alternative funding options like business lines of credit or a company that funds even with bad credit like Giggle Finance, which is better suited for business expenses.
What Are the Pros and Cons of Cash Advances for Gig Workers?
As a gig worker, you already know that cash flow can be unpredictable. When unexpected expenses hit, a cash advance can be an easy way to bridge the gap. But before you take the leap, let’s break down the pros and cons so you can make an informed decision.
Pros of Cash Advances for Gig Workers
One of the biggest advantages of a cash advance is speed. This can be a lifesaver when you’re dealing with urgent expenses, like a car repair or a surprise bill.
Another benefit is flexibility. You are not restricted in how you use the money, so you can pay rent, cover a client delay, or invest in your gig.
Cons of Cash Advances for Gig Workers
The downside? High fees and interest rates. Cash advances almost always come with extra costs, including transaction fees (typically 3-5% of the amount borrowed) and interest rates that start accruing immediately. Also, cash advances don't have a grace period, and interest begins to rack up from day one. This means that even if you only borrow a small amount, the repayment cost can add up fast.
There’s also the potential impact on your credit score. If you rely on cash advances too often, your credit utilization rate could skyrocket, which may lower your credit score. Plus, if you struggle to pay back the advance, late payments and accumulating debt can further damage your financial health.
Disclaimer: Giggle Finance provides Revenue-Based Financing programs for business purposes only. Any mention of any loan product(s), consumer product(s), or other forms of financing is solely for marketing and educational content purposes and to help distinguish Giggle Finance's product from other comparable financing options available in the market.