Does Cash Advance Affect Credit Score? Cash Advance Definition, Types, and Impact on Credit Score

Key Takeaways

• A cash advance is a type of small, short-term loan, usually with a high interest rate and fees.
• Cash Advance harms your score by spiking your credit utilization and increasing the risk of a missed payment—the two biggest factors in determining your score.
• Unlike regular purchases, cash advances come with high fees and APRs, and the interest starts immediately.
• Modern alternatives like Bree offer an interest-free cash advance with no credit check, meaning there is zero impact on your credit score.

"Does a cash advance affect my credit score?" It's a question driven by the fear of making a tough financial situation worse.

Technically, a cash advance isn't labeled differently than a regular purchase on your credit report. To a credit bureau, it’s simply more debt added to your credit card balance. So, the act itself doesn't directly lower your score like a hard inquiry for a new loan would.

But this technicality is misleading. A cash advance can severely harm your credit score through a chain reaction of indirect consequences.

How a Cash Advance Impacts Your Credit Score

A cash advance attacks the two most important factors of your credit score: your credit utilization and your payment history. While the transaction is invisible to credit bureaus, its consequences are not.

Risk 1: How Cash Advances Increase Your Credit Utilization

Your Credit Utilization Ratio (CUR) makes up about 30% of your FICO® Score. It’s the percentage of your available credit you’re currently using. A high CUR suggests you might be overextended, making you a higher-risk borrower.

Financial experts recommend keeping your CUR below 30%. A cash advance can cause this ratio to skyrocket.

Consider this real-world example:

• You have a credit card with a $1,500 limit and a $500 balance. Your current CUR is 33% ($500 / $1,500), which is already high enough to potentially lower your score.
• You take a $300 cash advance plus a 5% fee ($15).
• Your new balance jumps to $815.
• Your new CUR is now 54.3% ($815 / $1,500).

In a single transaction, your high utilization ratio becomes much worse, which will almost certainly cause a drop in your credit score.

Risk 2: How Cash Advances Can Damage Your Payment History

Your payment history is the single most important element in your credit score, accounting for 35% of it. One missed payment can cause significant, long-lasting damage.

A cash advance is dangerous because its high costs make it difficult to pay back. The combination of upfront fees, a higher interest rate, and no grace period means your balance grows much faster than with regular purchases. This rapidly growing debt can make it hard to afford even the minimum payments, leading to late payments that devastate credit scores.

The Real Cost: Cash Advance Fees and Interest Rates

Credit card cash advances are risky because they are expensive. Lenders view them as high-risk transactions and price them accordingly. The cost comes in several forms:

• Upfront Fee: Most credit card issuers charge a cash advance fee, typically 3% to 5% of the amount withdrawn (or a flat $10, whichever is greater).
• No Grace Period: Unlike regular purchases, interest on a cash advance begins accumulating the day you take it out.
• High APRs: The cash advance APR is almost always much higher than your card's purchase APR, often 25-30% or more.
• ATM Fees: You may also be charged an ATM fee by the machine operator or your bank.
• No Rewards: Cash advances do not earn rewards points or cashback.

To put this in perspective, compare a traditional cash advance to a modern alternative like Bree.

The table makes it clear: the complex, high costs of a cash advance stand in sharp contrast to the simple, low-cost structure of a modern tool designed to help.

Ready to see a better way? Get an interest-free cash advance with Bree today and avoid the debt trap.

Types Of Cash Advances

The term "cash advance" covers several products with varying levels of risk.

• Credit Card Cash Advances: As detailed above, this is the most common type, involving borrowing cash against your credit card limit via an ATM or a convenience check. While expensive, they are generally less costly than payday loans.  
• Payday Loans: These are small ($500 or less), ultra-short-term loans designed to be repaid on the borrower's next payday. They are infamous for their astronomically high costs. Instead of an APR, lenders often charge a flat fee, such as $15 for every $100 borrowed. While that may not sound like much, if you annualize the cost of a two-week loan, the effective APR can soar to 400% or higher. In Canada, payday loans from lenders like iCASH operate on a similar model, charging a fixed fee per $100 borrowed (e.g., $14 per $100), which still translates to a punishingly high annual rate. These products are so financially destructive that they are heavily restricted or outlawed in many jurisdictions.  
• Merchant Cash Advances (MCAs): This is a specific financing product for businesses, not consumers. An MCA is not technically a loan but an advance against a company's future credit and debit card sales. A business receives a lump sum of cash and repays it by having a fixed percentage of its daily card sales automatically deducted until the cash advance, plus a hefty fee, is paid back. MCAs are known for being very fast, easy to qualify for, and extremely expensive, with a largely unregulated market.  

Cash Advance Alternatives in Canada

Fortunately, if you need to access cash quickly, the landscape of options has expanded dramatically beyond the high-cost traditional choices. Many people are seeking alternatives to cash advances, and from consumer-friendly bank products to innovative FinTech solutions, there are far better ways to handle a financial shortfall.

Traditional Bank and Credit Union Options

Before you get a cash advance, consider these more established and safer alternatives:

• Personal Loans: An unsecured personal loan from a bank or credit union can be an excellent choice, especially for those with fair to good credit. Personal loans involve borrowing a specific amount of money that you receive as a lump-sum payment, which must be repaid over time in regular monthly installments. They often have a lower interest rate than credit cards.  
• Line of Credit: A line of credit is a flexible, low-interest revolving credit option that allows you to borrow as needed. You can withdraw cash from a line of credit up to your credit limit whenever needed, and once you pay down the balance, the funds are available to use again.  
• Overdraft Protection: Many banks offer overdraft protection, which allows you to withdraw more money than you have in your bank account, often by linking to a savings account, credit card, or a small line of credit. While this service can come with fees or interest, it is typically a much cheaper option than a cash advance.
• Payday Alternative Loans (PALs): Offered by some federal credit unions, PALs are a specific product designed to be a safe, affordable alternative to predatory payday loans. There are two types:  
  • PALs I: Loan amounts from $200 to $1,000 with repayment terms of one to six months.
  • PALs II: Loan amounts up to $2,000 with repayment terms of one to 12 months. For both types, the APR is capped at a reasonable 28%, and application fees are limited to a maximum of $20. Because payments are reported to credit bureaus, making on-time payments can help build your credit score.
• Use Your Credit Card for the Purchase: If possible, simply using your credit card for the purchase itself is more beneficial than a cash advance. You'll typically get a lower interest rate, a grace period before interest accrues, and you may earn rewards, which you don't get with a cash advance.  
• 0% Intro APR Credit Cards: If you need to make a large purchase and have good credit, applying for a new credit card that offers a 0% introductory APR on purchases can give you an interest-free loan for a period of six months to nearly two years.  
• Emergency Fund or Borrowing from Family: The absolute best option is to draw from an emergency fund you've built for this exact purpose. If that's not possible, borrowing from a trusted friend or family member can be a fee-free and interest-free solution, though it's important to treat it as a formal loan to avoid straining relationships.  

Modern Fintech Solutions: Interest-Free Cash Advance Apps

The rise of financial technology (FinTech) has introduced a new class of products designed to solve old financial problems with transparency and user-centric design. These tools are often more accessible, affordable, and flexible than their traditional counterparts.

Bree: A 0% Interest Cash Advance in Canada

At the forefront of this movement in Canada is Bree, a financial platform built to help Canadians manage short-term cash flow gaps without resorting to high-cost debt.

• What It Is: Bree offers interest-free credit card cash advances of up to $500 to help you cover unexpected expenses or bridge the time until your next paycheck.  
• How It Works: The process is refreshingly simple. You sign up for the app, securely link your primary bank account, and request an advance on your credit. The funds can be sent to you, and the cash advance is automatically repaid on your next scheduled payday.  
• The Key Difference: Bree's model fundamentally changes the cost structure of a cash advance. There is 0% interest and no mandatory fees on the cash advance itself. The service is supported by a transparent, low monthly membership fee (starting at $2.99) and gives users the option to add a tip or pay a small express fee for instant funding.  
• No Credit Impact: Crucially for anyone worried about their credit score, Bree performs no credit check to qualify you for a cash advance. Because there is no credit check and payments are not reported to credit bureaus, using Bree has no impact—positive or negative—on your credit score. It is a tool designed to operate outside the traditional credit reporting system, providing help without risk.  

Experience financial relief without the risk. Sign up for Bree in minutes and access up to $500 with no interest and no credit check.

Comparing Canadian Cash Advance Apps: Bree vs. KOHO vs. Nyble

Bree is part of a growing ecosystem of Canadian credit card companies offering alternatives to payday loans. Understanding the nuances is key:

• KOHO: The KOHO app offers a feature called "Cover," which provides an interest-free advance on a credit of up to $250 for a monthly subscription fee. It's a similar model, but with one important distinction: KOHO notes that loans outstanding for more than three months may be reported to credit bureaus at their discretion, introducing a potential credit risk that Bree avoids.  
• Nyble: This platform also provides small, interest-free credit lines (up to $250) but is specifically designed as a credit-building tool. Nyble reports your payment history to a credit union, which can be a significant advantage if you're looking to establish or improve your credit history, but it also means a missed payment could negatively impact your credit score.

This comparison shows that while all are better than a payday loan, they serve different needs. Bree is the ideal solution for users whose primary goal is simple, affordable access cash with absolutely zero risk to their credit score.

To simplify the decision-making process, this table summarizes the key features of the various alternatives.

Don't leave your financial health to chance. For a simple, affordable cash advance with zero risk to your credit score, Bree is your answer. Get started here.

A Step-by-Step Plan to Pay Off a Cash Advance

If you're struggling with cash advance debt, there is a clear path out.

1. Prioritize This Debt: Because of its high interest rate, cash advance debt should be your top priority. Free up cash by seeing if other debts can be temporarily deferred.
2. Create a Strict Budget: Review your budget to find money to pay down this debt. Temporarily cut all non-essential spending—dining out, subscriptions, etc.
3. Choose Your Repayment Strategy: The Avalanche Method (paying off the highest-interest debt first) is the fastest and cheapest. The Snowball Method (paying off the smallest balance first) provides psychological wins that build motivation. Pick the one you can stick with.
4. Use Extra Income: Commit any unexpected money—tax refunds, bonuses, or side hustle earnings—to paying down your cash advance.
5. Consider Consolidation: If the balance is large, consider consolidating it with a new, lower-interest personal loan or a balance transfer credit card.

Preventing Future Debt: How to Build an Emergency Fund

The best way to handle cash advance risks is to ensure you never need one. The ultimate strategy is building an emergency fund to handle unexpected life events from a position of stability, not desperation.

• Set a Goal: Aim to save three to six months of essential living expenses. If that feels impossible, start with a smaller goal, like $500.
• Automate Your Savings: Set up an automatic transfer from your checking to a separate savings account every payday.
• Choose the Right Account: Open a high-yield savings account (HYSA) to earn higher interest rates, allowing your money to grow faster.
• Use Windfalls Wisely: Dedicate a portion of any unexpected income directly to your emergency fund.

Building this fund takes time and discipline, but the peace of mind it provides is invaluable. It’s the key to handling life's surprises without worrying about what a cash advance might do to your credit score.

Building an emergency fund takes time. For the moments in between, Bree can help. Get the support you need today without the debt.

Frequently Asked Questions (FAQ)

What is a cash advance?

A cash advance is a short term loan taken against your credit card's credit line, allowing you to withdraw cash from an ATM or a bank. Other types include payday loans (a loan against your next paycheck) and merchant cash advances (for businesses).  

Does a cash advance hurt your credit score?

Yes, a cash advance hurts your credit. While the transaction isn't labeled "cash advance" on your report, it increases your credit card balance, which can raise your credit utilization ratio and lower your credit score. The high fees and interest also make it easier to miss a payment, which would significantly damage your credit score.  

What are the advantages of a cash advance?

The main advantages of a credit card cash advance are speed and convenience. You can get a cash advance almost instantly from an ATM without a new application or credit check.  

What are the disadvantages of a cash advance?

The major disadvantages are the high costs, including an upfront cash advance fee (typically 3% to 5%) and a high interest rate (often near 30%) that starts accruing immediately with no grace period.  

How is a cash advance different from a payday loan?

A credit card cash advance is a loan against your credit limit, while a payday loan is a loan against your next paycheck. Both are expensive, but payday loans usually have much higher fees, with APRs that can exceed 400%.  

Can I pay back a cash advance immediately?

Yes, and you absolutely should. You can make a payment as soon as the transaction posts to your credit card account, which is the best way to minimize the high interest charges that start building from day one.  

What are the main fees for a credit card cash advance?

You'll typically face two major costs: an upfront cash advance fee of 3% to 5% of the borrowed amount, and a higher-than-normal interest rate (APR) that starts accruing immediately.  

Will lenders see that I took a cash advance?

No, lenders will not see the transaction specifically labeled as a cash advance on your credit report. They will only see that your credit card balance has increased.  

What are some safer alternatives to a cash advance?

Safer alternatives include modern financial apps like Bree, which offers interest-free advances with no credit check, or a Payday Alternative Loan (PAL) from a credit union, which has capped interest rates. Borrowing from family or asking your employer for a paycheck advance are also much cheaper options.

How much money can I get with a cash advance?

Your cash advance limit is usually much lower than your regular credit limit. You can find your specific card's cash advance limit on your monthly credit card statement or by checking your account online.  

Can I get a cash advance if I have bad credit?

If you already have a credit card, you can typically take a cash advance regardless of your current credit score because you've already been approved for the credit line. However, this doesn't make it a good financial decision due to the high costs involved.