Cash Advance APR Calculator
Understanding Your Cash Advance APR
A cash advance can be a quick way to get funds, but it often comes with a high cost. Unlike a standard loan with a clear interest rate, cash advances typically involve upfront fees that, when annualized, can result in a surprisingly high Annual Percentage Rate (APR).
What is a Cash Advance?
A cash advance allows you to withdraw cash from your credit card's available credit limit. It's not the same as a regular purchase. While convenient for emergencies, the costs associated with cash advances are generally much higher than those for typical credit card transactions.
How is Cash Advance APR Calculated?
The APR for a cash advance is primarily driven by the fees charged and the short repayment period. Here's a breakdown of the components:
- Cash Advance Amount: This is the principal amount of cash you receive.
- Cash Advance Fee (Percentage): Many credit card issuers charge a percentage of the advance amount as a fee (e.g., 3% or 5%).
- Fixed Cash Advance Fee: Some issuers might also have a minimum fixed fee (e.g., $10), meaning you'll pay the greater of the percentage fee or the fixed fee, or sometimes both apply. Our calculator sums both for a comprehensive estimate.
- Repayment Period (Days): This is the number of days until you repay the advance. Because cash advances often accrue costs immediately and are expected to be repaid quickly, even small fees can translate to a very high APR when spread over a full year.
The calculator takes these inputs to determine the total cost of the advance for that specific period, then annualizes that cost to give you an estimated APR. This helps you understand the true yearly cost of borrowing through a cash advance.
Why is the APR So High?
The primary reason cash advance APRs are so high is the combination of immediate fees and the short-term nature of the borrowing. Even a small fee, when applied to a short period (like 30 days), becomes a very large percentage when extrapolated to an entire year. For example, a $25 fee on a $500 advance repaid in 30 days might seem small, but it represents a 5% cost for just one month. Annualized, that's roughly 60% APR.
When to Use This Calculator
Use this calculator before taking out a cash advance to understand the potential annual cost. It can help you compare the cost of a cash advance against other short-term borrowing options, such as personal loans, payday loans, or even borrowing from friends or family. Knowing the APR can help you make a more informed financial decision.
Example Calculation:
Let's say you take a cash advance of $500. Your credit card charges a 5% cash advance fee and a fixed fee of $10. You plan to repay this advance in 30 days.
- Cash Advance Amount: $500
- Percentage Fee: 5% of $500 = $25
- Fixed Fee: $10
- Total Fees: $25 + $10 = $35
- Cost for the period: $35 / $500 = 0.07 (or 7%)
- Annualized Rate: (0.07 / 30 days) * 365 days = 0.85166…
- Estimated APR: 0.85166… * 100 = 85.17%
As you can see, even with seemingly small fees, the annualized rate can be very substantial.