Fees and borrowing costs
How Credit Card Cash Advances Work in Canada
A cash advance lets you take cash from your credit card, but it usually costs a fee plus a higher interest rate charged from the same day, with no grace period. What it costs and what to use instead.
What is a credit card cash advance?
Taking cash from an ATM or bank with your credit card, or using the card for transactions treated like cash, such as money orders, some money transfers and convenience cheques. Balance transfers are often treated the same way.
Why are cash advances so expensive?
Three reasons: there is no interest-free grace period, so interest starts the day you take the cash; the cash advance rate is usually higher than the purchase rate; and most cards add a fee per advance.
For scale: $1,000 at 22.99% repaid at $100 a month costs about $121 in interest over 12 months, before the advance fee or any ATM fee.
Is there a grace period on cash advances?
No. The 21-day interest-free grace period required by federal rules applies to new purchases when you pay your balance in full, not to cash advances.
How do I pay off a cash advance faster?
Pay more than the minimum. Amounts above the minimum must go to the balance with the highest rate first or be split proportionally, so extra payments reduce the expensive cash advance balance.
If you also have a purchase balance, paying the full statement balance is the only way to stop interest on both.
What should I use instead?
An emergency fund in a savings account is the cheapest option. Otherwise, a line of credit or overdraft protection usually charges less than a cash advance; a payday loan usually charges far more.
If you need cash abroad, a debit card or a no-foreign-transaction-fee card used for purchases usually costs less than taking a cash advance from an ATM.
Keep reading
Fees and borrowing costsHow Does Credit Card Interest Work in Canada?Understand APR, purchase grace periods and a monthly interest approximation before comparing card rewards.
LoansPayday Loans in Canada: Costs and AlternativesWhat payday loans cost under provincial rules, why they are so expensive, and cheaper ways to cover a short-term gap.
Fees and borrowing costsHow the Credit Card Grace Period Works in CanadaCanadian credit cards must give at least 21 days without interest on new purchases when you pay the full balance. When the grace period applies, when it does not, and what carrying a balance costs.
BankingHow Much Should Your Emergency Fund Be in Canada?How big an emergency fund should be (3 to 6 months of expenses), where to keep it, and how much interest it can earn: 2.8% at the best online savings account we track versus 0.48% at the big banks on average.
Official sources and further reading
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