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What’s the Difference Between a Cash Advance and a Balance Transfer?

June 10th, 2022 | 11 min. read

What’s the Difference Between a Cash Advance and a Balance Transfer?

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Did you know credit cards can be used for more than just swiping to make a purchase in a store or online? You can also take advantage of your credit limit to do a cash advance and withdraw cash or use a balance transfer to move a balance from another credit card.

Whether you’re in a bind and need to pay for something in cash but don’t have the available funds in your bank account, or you’re trying to consolidate and pay down debt on your credit cards, these features are designed to help you. But, before you take advantage of these card features, you need to understand how to do it responsibly.

 

 

first, a quick look at what we’ll cover

 

what is a cash advance?

Need fast money? A credit card cash advance is an easy way to get your hands on cash, plain and simple. The cash advance allows you to withdraw cash from your credit card, but the amount you can withdraw is based on your credit card limit.

QUICK TIP: Expect to pay more money in fees and have an interest rate increase when you withdraw cash against your line of credit.  Not only will you have to pay more back to the lender, but many lenders also don’t offer a grace period when borrowing against your credit card line of credit.

 

Many cardholders can do a cash advance in the following ways:  

  • Go to an ATM:You insert your credit card and withdraw the funds at an ATM like you would with your debit card since your credit card also has a unique PIN (Personal Identification Number) for this situation. Expect to pay an ATM fee in addition to the fee your lender will change when doing a cash advance.  
  • Visit your financial institution: Go to your financial institution in person and request a cash advance using your credit card.
  • Use a check: Some lenders send checks when mailing the cardholder's credit card. You can write out a check to yourself and then deposit or cash it to receive physical cash 

DO CASH ADVANCES COUNT AS PURCHASES?

Nope! Using a credit card to make purchases does not show up the same as a cash advance when reviewing the credit card transaction. Your lender will disclose the terms of your credit card regarding cash advances within your agreement. Make sure you check it, so you're not surprised if they hit you with a high fee.  

 

what is a balance transfer?

A balance transfer is when you move your credit card debt from one (or multiple) credit cards onto a different credit card. Preferably, you’re transferring the balance onto a card with a lower interest rate or taking advantage of a credit card offering a 0% Annual Percentage Rate for a certain time period. This is the route credit cardholders take when they are working on eliminating their debt. 

First and foremost a balance transfer does not eliminate your debt. You still have to pay it, you just get to consolidate your debt and transfer funds from one or multiple credit cards to another credit card, but you ultimately still have the balance.

It’s important to note balance transfers aren’t for every cardholder, either! There's a chance you could pay a balance transfer fee, use your entire credit limit transferring the balance so there’s no cushion for emergency spending, and more.

These are all points financial experts - especially experts here at Charlotte Metro - advise credit cardholders. Psst... luckily, we never charge a balance transfer fee (or annual fee... or cash advance fee) but there are still some other factors to look out for when considering a balance transfer.

QUICK TIP: We never charge a balance transfer fee (or annual fee... or cash advance fee). And - when you open a new Charlotte Metro Visa Platinum or Platinum Rewards credit card - you'll unlock 0% APR1 for the first 12-months, giving you more time to knock down your balance without accruing additional interest!

Explore Our Credit Cards

 

that's not all a balance transfer can do

Did you know a balance transfer can also be completed when you have available funds from your credit card account transferred onto your checking account? I had it done at Charlotte Metro when I was buying a phone and there was no fee. Let me explain further.

Months ago, I personally experienced issues with a merchant online when attempting to purchase a new phone. I was using my credit card to complete the transaction and on the first two attempts when using my credit card, I received an error message. At that moment I knew something couldn't be right because I had available credit. So I talked to one of our MSA's who helped me out. She was able to transfer the exact amount I needed to buy the phone from my credit card into my checking account. Psst... since I'm not withdrawing actual cash from my credit card account this is not considered a cash advance. The best part of it all was there's no balance transfer fee. 

If you've experienced the same or similar issue, or you just want the available credit that you have transferred to your checking account, consider talking to your financial institution. Psst... be prepared. All financial institutions don't provide free balance transfers.  

 

pros and cons of a cash advance and balance transfer?

 

pros and cons of a cash advance 

Advantages: 

  • Fast cash when you need it: No need to wait for a financial institution to open. You can go to an ATM to withdraw. 
  • You don't need to apply for new credit: if you want to take advantage of the loan the lender originally loaned you no need to apply for a new line of credit to withdraw cash.  

Disadvantages: 

  • You'll have to pay additional fees: Some lenders add on more fees for cash advances and, if you withdraw from an ATM, there will be ATM fees. 
  • You'll receive an even higher interest rate: Meaning your new debt can be hard to pay off and may linger and the balance on your credit card will grow until paid off.
  • Must repay it quickly: Once you withdraw against the credit card, interest gets added on immediately, making it more costly to repay the lender.  
 
pros and cons of a balance transfers 

Advantages: 

  • You can consolidate your debt: If you have too many credit cards, consolidating would help remove any confusion with making your payments. 
  • You save money on interest:When doing a balance transfer, you can move it to a card with the lowest interest rate, saving you money in the long run. Plus, you could take advantage of an introductory 0% APR* credit card (for a set amount of time) and work to pay off your balance before the interest kicks in. 

Disadvantages: 

  • Balance transfer fee: Depending on the lender, there may be a balance transfer fee. 
  • The 0% APR doesn't last forever: When transferring onto a credit card 0% APR*, it’s only for an introductory period. 
  • Balance transfer may not work in your favor: Depending on your spending habits, once you transfer the funds onto a new credit card you may still be using that card and dig yourself deeper into debt.
  • A good credit score may be needed: if you're trying to take advantage of a 0%* APR credit card, you could be applying for a new line of credit. Depending on the balances you’re already carrying, your credit score may not qualify for a new card and you could be denied and stuck with managing your large debt.

Psst... if you're finding yourself struggling to pay off high balances on credit cards and you think a balance transfer is not an option for you, there are other ways. Check out how I got out of more than $50,000 in debt with this paydown strategy   (I know it might sound cliche but if I can do it, you can do it too!).     

 

when does it make sense to do a balance transfer or cash advance?

Knowing when to do a balance transfer or a cash advance truly depends on what you want to do. If you have too many credit cards and you’re looking to reduce the amount of debt you have on your plate, then a balance transfer would make sense. If you just looking for fast cash to cover an emergency or dealing with a merchant who only accepts cash and not a card, then a cash advance would work.

 

Alternatives to cash advances:

If you need cash but don’t want to do a cash advance, you can:

  • Borrow the funds from family or friends: It’s less likely they’ll ask you to repay the funds back with interest.
  • Use cash: If you have the cash on hand, you can grab your debit card and withdraw from your checking account which would help you to avoid paying interest.
  • Get a personal loan: Consider applying for a personal loan to get the cash you need to be deposited directly into your account. (Psst… Depending on how much you need and what your interest rate is, this could be a cheaper alternative).

 

Alternatives to Balance transfers:

As I mentioned earlier, balance transfers are typically granted to those who have good credit scores. If you know your credit score needs work, there are ways you can work on your current debt situation. You can:

  • Start tracking your credit card spending:  If you have too many credit cards and need help with managing them and sticking to a budget, you can start by tracking your spending. When you start tracking, you could get ahead of unnecessary fees and probably spot charges you did not authorize.  Psst...you’ll also be able to catch any changes made to your interest rate. You can start tracking your credit card spending here.
  • Debt management program:  You can set up your own debt management program. with a spreadsheet, a strategy, being open and honest with your lender, setting spending limits, and tracking your progress, you could very well get out of debt on your own. Here's exactly what you can do. 

here’s what’s next

No matter what you decide to do, it’s important to always plan for and use your credit card responsibly. If you want to learn more about credit cards in general to beef up your knowledge of credit cards and how to best use them, here's an article perfect for you. Psst... even if you have a credit card already, it's never too late to learn all there is to credit cards. 

Read Now

 

If you’re interested in opening a 0% APR* credit card to take advantage of a balance transfer or cash advance, consider one of Charlotte Metro’s credit cards. We never charge a balance transfer fee (or annual fee... or cash advance fee). And - when you open a new Charlotte Metro Visa Platinum or Platinum Rewards credit card - you'll unlock 0% APR1 for the first 12-months, giving you more time to knock down your balance without accruing additional interest!

Explore Our Credit Cards

 

As always If you have any questions or comments, our Customer Service Representatives are here for you. You can send an email, give us a call at 704.375.0183, or visit any of our branches

 

 

ok here's the fine print

1During the first twelve (12) months from account opening, the rate for purchases and balance transfers will be 0.00% Annual Percentage Rate (APR). After the twelfth (12) month, your balance for purchases and cash advances will adjust to the rate in your credit card agreement. As of the first day of each month, the APR for variable-rate Visa credit cards ranges from 7.65% to 17.95%. This rate will change with the market based on the Prime Rate. Rates are subject to change without notice. APR may vary depending on a review of your credit score and other underwriting factors. Balance transfer amounts may not exceed your approved credit limit. Standard underwriting terms and conditions apply.

Yanna

Yanna

As the Content Specialist and author of the Learning & Guidance Center, Yanna enjoys motivating others by uncovering all that's possible in the world of finance. From financial tips and tricks to ultimate guides and comparison charts, she is obsessed with finding ways to help readers excel in their journey towards financial freedom.

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