Are you considering a credit card cash advance? CreditCards.com says a typical fee is $10 or 5%, whichever is greater, and the average interest rate for cash advances is almost 24%, compared to 15% for purchases. Add to that an average ATM fee of $4.57, if that’s where you get the cash.
For example, if you need $1,000 for a month, you might pay a $50 cash advance fee, $20 in interest, and a $4.50 ATM fee. That’s $74.50 total to use the money for a month, which is an annual rate of 89.4% — a pretty expensive way to borrow.
You might consider overdrawing your checking account or going to a payday lender instead, but as Forbes points out, both of those options can be even more expensive. Fortunately there are better ways. Here are some of your cheaper cash advance alternatives.
1. Use a Balance Transfer or Convenience Check
Depending on the particulars, “convenience checks” from credit card issuers can be much cheaper than getting a cash advance.
For example, among the four sets of these convenience checks I’ve received this month, two of them are offering 0% interest for six months to a year, and those two also have only a 1% fee ($5 minimum). I could write a check to myself for $1,000, cash it at the bank, and pay just $10 to use the money for up to a year (although a partial repayment would be due each month).
The deals you’re offered are partly determined by your credit score, and 1% fees are not common. But even if the fee was a more typical 3% you would pay only $30 to borrow $1,000 in this way. And if you need the money for several months you’ll really save with the zero-interest offers.
If you need the money right now you might not be able to wait for some convenience checks to arrive in the mail. But you can get in the habit of setting them aside when they come. They’re usually good for about two months before the offer expires (after that using them typically costs the same as a regular cash advance).
Keep a few of these low-interest or 0% interest convenience check offers around, and when you need fast cash you’ll be ready.
2. Buy and Unload Debit Gift Cards
Instead of a $1,000 cash advance, use a credit card to buy two $500 debit gift cards, then turn them into cash. It sounds simple, but it can be complicated, and changing rules are making this strategy tougher to use. I’ll explain…
Visa and Mastercard gift cards of various values are sold at office supply stores, pharmacies and many other places. You don’t want American express gift cards, which must be used like credit cards. You need PIN-enabled debit gift cards. Some let you choose your 4-digit PIN on your first purchase by entering any number. Others use the last four digits of the card number. Some cards require you to call or go online to set your PIN.
Once you know your PIN go to any of the places that let you buy money orders with debit gift cards, and use the debit cards to buy money orders, entering your PIN when prompted. I like Walmart because it costs only 70 cents for a money order. Buy a money order for $499.30 so, with the 70-cent fee, the entire charge is $500 — the exact balance on the card. Repeat with the second card.
I’ve done this many times at Walmart just to boost my “spend” to earn credit card bonuses. However, it is getting tougher. For example, Kroger banned money order purchases using gift cards, and some Walmart stores may allow money order purchases using debit cards that have your name on them (although they rarely check in any case).
It’s important to use the $500 debit cards to avoid excessive costs. For example, buying five $200 gift cards would result in five fees to buy them and five money order fees, instead of two of each. Check online for grocery stores that sell $500 gift cards, or just look around.
Cash the money orders at your bank and you have your cash, or deposit them and withdraw the money as necessary.
If you paid a typical fee of $6.95 for each $500 gift card (although you can usually buy them for $4.94 at Walmart), and 70 cents for each money order, your total cost would be $15.30 to get your cash, which is much cheaper than a cash advance.
If you pay your credit card in full each month you won’t pay a penny in interest because the gift cards are purchases. Depending where you are in your credit card payment cycle you can use the money interest-free for up to seven weeks. (Ideally you would use a credit card for which the statement date had just passed, so you have four weeks before the next statement date and then three more weeks from there to the payment date.)
It used to be even easier (and cheaper) to use gift cards to load a Bluebird account at Walmart, and then transfer that balance to your bank account. This has become very difficult because of changing rules, and my Bluebird account (like many others) was closed due to this kind of activity.
3. Buy PayPal “My Cash” Cards
If you have a PayPal account you can buy two $500 PayPal My Cash Cards with a credit card, load the $1,000 to your account, transfer the money to your bank account, and withdraw it. Again, this is not quite as simple as it sounds…
First, find places that sell My Cash Cards.
Second, see which ones allow you to buy them with a credit card. Many places only sell My Cash Cards for cash, but I’ve bought them with a credit card at CVS pharmacies. Try a few places until you find one that allows this.
Third, follow the instructions on the cards to load your PayPal account online. It will take two days because you can only load $500 per day.
Fourth, transfer the money from your PayPal account to your bank account. This can take up to several days, so this isn’t the fastest way to raise cash.
Finally, withdraw the money from your bank account.
WARNING: While there is nothing illegal about this strategy, there is more than one report of PayPal suspending accounts when users use it too often, and it can be a hassle to get your account reinstated. You’ve been warned.
There is a $3.95 fee for buying/loading your PayPal My Cash Cards, and a maximum load of $500. At that rate it costs you just $7.90 to get $1,000. If you’re in the habit of paying your credit card balance in full every month, you won’t pay any interest on your purchases of the cards.
4. Just Use a Credit Card for Everything
Maybe you only think you need a cash advance. It may be possible to use your credit cards in place of the cash. The interest rate on credit card purchases is lower and you can avoid the cash advance fees.
So what were you going to use the cash for? Maybe a specialty processor can charge your card instead. Here are some examples of things you might normally pay cash or write a check for, but can be charged to your credit cards.
You can pay your rent using services like RentMoola or RentShare. The latter even lets you set things up with your roommates so each one pays his or her share. The fees are usually under 3%, making them less than most cash advance fees. You also receive cash-back or other rewards your credit card offers.
Most local authorities don’t want to deal with credit cards and the associated processing fees, but that doesn’t mean you can’t use you cards to pay your property taxes. Just use a service like Plastiq. If you have a 2% cashback card their 2.5% fee will leave you paying just .5%, which is less than most cash advance fees.
None of the IRS approved payment processors charges more than 2% of the amount you’re paying. That makes them all cheaper than a typical cash advance. And again, you get any cashback or rewards your card offers.
While many of these online payment processors specialize, Plastiq says “Any business can be paid through Plastiq, even if they don’t accept cards.” They simply charge your card and send a check or direct deposit. At the moment their maximum fee is 2.5%, which is still less than most cash advance fees.
When you use these credit card processors there are actually four ways you can save money versus getting a cash advance.
- The fees charged are almost always lower than cash advance fees.
- Because the charges show as purchases on your account, you pay a lower interest rate than you would for a cash advance.
- Because the charges show as purchases you still get cash-back or other rewards your card offers, which you never get on cash advances.
- If you pay your balance in full every month you pay no interest, unlike a cash advance, which starts accruing interest the day you get it.
5. Pay a Friend’s Bills With a Credit Card
This is a tricky strategy that requires an understanding friend who is planning to spend a lot of money. The idea is to pay for his or her purchases using your credit card and then have the friend give you the cash.
This allows you to effectively get a cash advance with no fees, and pay the lower purchase interest rate on your card, or pay no interest at all if you pay in full every month.
Of course, this does mean you have to go shopping with your friend. It also means that if a return is necessary you’ll get the credit on your card, leaving you to figure out how to return the cash to your friend. In other words, it isn’t one of the better ways to avoid a cash advance loan.
To keep it simpler you could pay a friend’s rent or other household bills with your credit card, and have her repay you in cash, but even this requires a close and very helpful friend. You might want to do this with a family member instead, which brings us to our next strategy…
6. Borrow From Family
Borrowing from family could be the simplest way to avoid the cost of a credit card cash advance. Or it could be next to impossible. It depends on your family member’s willingness and ability to loan you the money. In my family loans are always made with interest charges, and always repaid, both of which help with the willingness part.
Have a plan for repayment figured out before you ask for the loan. Then, put it in writing.
If a family loan is made without interest, the IRS may still tax the lender based on imputed interest, figured at the “Applicable Federal Rate.” But according to TurboTax, this rule doesn’t apply to “gift loans” under $10,000, as long as the money isn’t used for investments.
Still, the money you borrow could have been making a little bit of interest for your family member, so pay something. At 12% annual interest it would cost you just $10 to borrow $1,000 for a month. That’s one of the cheaper options here.
7. Raise Cash in Other Ways
Maybe you don’t need a cash advance or a loan at all, if you get busy raising the money in other ways. Sell your stuff, call people who owe you money, or do a cash job this afternoon. These are just a few of the suggestions in our list of 36 ways to raise cash today.
One of the best things about selling stuff and other strategies that don’t involve borrowing, is that they usually cost you nothing but your time and effort. You eliminate all the usual costs of getting a credit card cash advance and you don’t add to your debt. This is probably the best solution if you can make it work.
If you know of another cheap cash advance alternative, tell us about it below, and happy frugaling!