A cash advance does not directly affect your credit score, and your credit history will not indicate that you borrowed one. However, the balance of the cash advance will be added to your credit card debt, which can hurt your credit score if you raise your credit utilization ratio too high. This ratio reflects the amount of available revolving credit you are using. A high ratio can negatively impact your credit score, especially once it exceeds 30%.
The answer is “no, with a small caveat”. Payday cash advances are part of a subset of bad credit loans called “loans without credit checks”. Since these lenders do not perform any checks of your credit history during the application process, they do not report your payment information to the credit bureaus either. The cash advance is added to your balance, which changes the utilization of the credit.
Credit utilization is a score that analyzes how much of your total credit you are using. Ideally, you should keep this number below 30%. A cash advance could easily cause its use to exceed that number and damage its credit rating. Cash advances almost never make sense. Without a grace period, interest on your cash advance starts accruing the same day you receive your funds.
For a credit card cash advance to adversely affect your credit score, you would have to make your balances exceed 30% or it would have to be such a massive increase in your balances that it would reflect a major change in your total amounts owed. Getting a cash advance is as easy as going to a bank teller or ATM, presenting your card and taking cash. If they are becoming a habit, or if you find that you regularly need a cash advance to make ends meet, then you need to make drastic changes to the budget and expenses. A cash advance can come in handy if you desperately need money right now, but like a payday loan or car title loan, a cash advance from a credit card can quickly lead into a debt den that will put you into debt and could destroy your credit rating. When you receive a cash advance from a credit card, the money you are lent “in advance” or, more technically, increases your overall credit card balance.
But how does this affect your credit score? Is there any chance that it can help you in the long run? (If you are curious to know all the details about cash advances, see OPPU's guide What is a Cash Advance?). While credit card cash advances are far from an ideal financial solution and will not help boost your credit score, they are much more preferable to “cash advance loans” which are actually disguised payday loans. However, if you consider cash advances solely because you forgot to bring cash, you may want to check debit cards that don't have ATM fees. Both cash advances and payday loans are ways to get a smaller amount of money for a short period of time, and both come with high fees and interest rates. The difference will vary from card to card and customer to customer, but the average credit card APR is just over 16%, while the average APR for cash advances is almost 24%.
While it's still a good idea to pay off your cash advance as soon as possible, there's no way to avoid paying interest. Taking out a cash advance should be the last resort when getting money, as the rates and fees for doing so are high. Cash advances are generally high in interest rates and charges, but they are attractive to borrowers because they also have quick approval and fast financing.
