What Does APR Mean: Cash Advance APR

The cash advance APR is the annual percentage rate of interest you have to pay for credit card cash advances. It's typically higher than the APR for ordinary purchases. If you have a credit card with a special introductory rate, that rate usually doesn't apply to cash advances. A cash advance APR may be as high as 25 percent.

The Purpose of a Higher APR

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Banks receive a percentage of your purchase price from the merchant when you buy something with a credit card. The higher rate on cash advances helps make up the difference in bank profits. In addition, banks consider cash advances as a possible sign you're in financial trouble according to Bankrate. Because they consider these loans riskier than routine purchases, banks charge a higher rate to make up for possible losses.

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Total Cash Advance Charges

Banks usually charge a fee in addition to interest on a cash advance, but the fee isn't included in the APR. The usual fee varies from 2 to 5 percent of the cash advance, according to NerdWallet. You also may have to pay automatic teller machine charges. When you count up all the fees, you're paying much more than the stated APR.

Find the interest rate and fees for cash advances in your credit card agreement.

Warning

Banks start charging the APR on a cash advance immediately. Most credit cards have a grace period for purchases, meaning you don't pay interest if you pay the entire balance each month by the due date. The grace period doesn't apply to cash advances.

Special Types of Cash Advances

You can get your cash advance at the bank branch or ATM, but other credit card transactions also count as cash advances and charge the higher APR. These include purchases of traveler's checks, foreign currency, lottery tickets and money orders. Online transfers from your credit card to a bank account also count, according to the Bank of America.

You usually pay the cash advance APR for credit card convenience checks, and you may also have to pay a cash advance fee. On the other hand, some banks offer a low promotional interest rate with no fee on convenience checks. In this case, the low rate normally applies only for an introductory period.

Limiting Your Cash Advance Expenses

Bank of America recommends you use cash advances only in true emergencies -- for example, if you paycheck is delayed. It also recommends ways to keep your costs low:

Limit your interest and fee charges by not getting more cash than you need.
Some banks charge both a flat rate and a percentage as a cash advance fee. In this case, get all the money need at one time. Don't get multiple advances.
Before using a cash advance, make a plan for paying back the money. Adhere to your plan so you don't pay interest any longer than necessary.

Tip

If you pay more than the minimum on your credit card, by law the extra amount must go to the highest-interest debt first, according to Bankrate. Paying extra beyond the minimum will pay off your cash advance before it goes to lower-interest charges.