Can You Get a No-Interest Cash Advance Loan?

Unlike regular credit card purchases, cash advances do not come with an interest-free grace period.

You have a financial emergency. You need cash. You don’t have friends or family who can lend you money interest-free (although if they can, we suggest you sign a personal loan agreement).

For obvious reasons, you would certainly prefer to have a no-interest cash advance to see you through this rocky period, but how likely are you to get one?

If you're borrowing money, whether it's from a cash advance or a personal loan, you are going to be charged some form of interest or fee. The key to using credit cards responsibly is to make sure you pay them off within the 30-day interest-free grace period. That way, you're getting those points or miles for free! But if you think the same thing applies to credit card cash advances, think again.

What are credit card cash advances?

Before we get into why it may not be possible to get a no-interest cash advance, let’s first establish what exactly a cash advance loan is; a way to use your credit card to withdraw cash.

The process for getting a cash advance is similar to withdrawing money from your bank account with a debit card; you put your credit card in the ATM, choose the amount you want to withdraw, and get your money (for more information, read What is a Cash Advance?).

However, you will have to pay a fee for taking out a cash advance in addition to any applicable ATM fees. Since a cash advance is a type of loan and not an actual cash withdrawal, it is money that you will have to pay back.

In that sense, it is similar to a regular purchase on your credit card. All you're doing is adding more money to your total balance. Credit cards are a line of credit, which means using your card is taking out a loan that you'll eventually have to repay.

One big difference between credit cards and regular loans is that, if used correctly, you can borrow money on your card without ever having to pay any money towards interest. Does this mean that you could also take out an interest-free cash advance?

Unfortunately, no.

Credit card cash advances don't have grace periods.

The vast majority of credit cards have an interest-free grace period on regular purchases. A grace period is an amount of time before a given purchase starts accruing interest. With credit cards, the grace period is usually 30 days.

As long as you pay your credit card bill on time and in full every month, you can avoid paying interest.

Unfortunately, this is not the case with credit card cash advances. There is no grace period for cash advance loans, when you take out a cash advance on your credit card, interest begins to accrue on that transaction amount immediately. Not only that, most cash advances have a separate, higher APR from regular credit card purchases. The sooner you pay off that balance, the less interest will accrue, but this does mean that you can’t take out a credit card cash advance without paying at least some amount of interest.

And that’s not the only way that a credit card cash advance will prove more expensive - you will usually be charged an additional fee for making the transaction.

To compare interest rates, use the annual percentage rate, or APR, which measures how much a loan or credit card will cost, including both fees and interest, for a full year.

The average APR for a credit card is 22.75%, while the average APR for a credit card cash advance is 24.7%, but could reach 36%. It is important to note that these are average rates. Your credit score will determine the interest on loans you take out. It is crucial not to let higher rates lead to your balances getting out of control as it may make it harder to get better rates on future loans and credit cards, resulting in more money paid towards interest.

In summary, when you take a cash advance on your credit card, not only will you pay interest, you will likely pay more than you would for a regular purchase.

So far we’ve been operating under the assumption that you possess a credit card. What if you don’t?

You should avoid loans that are advertised as "cash advances."

If you don’t have a credit card, you will not be able to get a cash advance loan, let alone the fabled interest-free cash advance loan.

“But wait,” you say, haven’t you seen ads for cash advance loans in storefront windows and online that suggest you can get a cash advance loan without a credit card?

Here's the thing: Those aren't cash advance loans. Instead, they're bad credit loans that don’t require you to have a good credit score. And while some bad credit loans, especially installment loans, can be a good financial solution, many of them are not.

Two risky kinds of bad credit loans are payday loans and title loans.

These cash advance loans don’t come with an interest-free grace period. That’s not even how they accrue interest. Finance charges for these types of personal loans are generally calculated as a flat rate and don’t accrue over time.

Both payday loans and title loans have very high APRs and short payment terms. Title loans use your car as collateral and repossess it if you don’t pay the loan back. These are the kinds of loans where the lender would prefer to roll your loan over to extend the due date in return for additional interest. It works great for them, even as it steadily drains your bank account.

Furthermore, the lump-sum repayment terms for these short-term loans make them very difficult for many people to repay. That’s how they end up reborrowing the loan, rolling it over, paying only the interest owed, and extending the due date complete with a new interest charge.

What are other options besides a credit card cash advance?

Assuming your credit score is good, you can probably get a loan with a decent APR from a bank. If your credit score is bad and you don’t qualify for a credit card, you might still be able to get a secured credit card. A secured credit card requires cash as collateral, but if you don’t use it as much and pay your bill on time, in full every month, it’s a great way to build your credit.

If you have bad credit, don't have a credit card, and need a loan, you probably have to choose from less than ideal options. When searching for the best loan, be sure to compare APRs to find the lowest rate you can qualify for and also check online reviews. You wouldn’t eat at a restaurant with under three stars, so don’t get a loan that will give your bank account metaphorical food poisoning.

And of course, be sure to read thoroughly before you sign anything. A no-interest loan might be a fantasy, but that doesn’t mean you have to settle for a payday loan.

Save up cash for a rainy day.

While a cash advance might be a marginally safer bad credit loan option than, say, a predatory title loan or an overdraft fee, that doesn’t mean it’s a good option.

You might do better with a bad credit installment loan, but the best thing you can do is save up a cash emergency fund. That way, you won’t have to take out any debt at all to cover emergency expenses!