Short answer: hardly ever. Here's list of better and cheaper options.
Cash advances seem to be a major feature of your credit card. Each card lists a cash advance APR, and you’re invited to create a PIN to enable that feature. It’s easy to see why banks are eager for customers to use it — it’s incredibly expensive.
The costs of a cash advance
How expensive? Let us count the ways…
Cash advance fees. This is the first fee you face when withdrawing money from an ATM. For example, the popular Chase Freedom card charges a cash advance fee of either $10 or 3 percent, whichever is higher. So when you withdraw $40 to pay for a cab, you’ll immediately have a $50 charge on your account.
ATM fees. Most ATMs charge a fee for any transaction when the cardholder isn’t a member of their bank. These fees are typically $2 to $5 and are disclosed before the transaction.
Cash advance interest rates. Most credit cards charge a much higher rate for cash advances than they do for standard purchases. For instance, the Citi Dividend Platinum Select card charges an interest rate of 25.24 percent for cash advances, although their rate for standard purchases is as low as 12.99 percent for their most qualified cardholders.
No grace period. The real kicker is that cash advances are immediately subjected to these higher interest rates, and there’s no way to avoid these interest charges by paying the statement balance in full. In contrast, when cardholders make a standard purchase, there’s often no charges at all as long as they pay their statement balance in full to avoid interest.
So for most people, it never makes sense to take a cash advance from their credit card. The costs can be astronomical.
Alternatives to credit card cash advances
Once you realize that cash advances are only marginally better than payday loans or the mob, you’ll need to find some better alternatives. Here are a few…
Use a debit card. Credit cards are hard to get, since you need good credit. But any bank will offer its account holders a debit card that can be used at their ATMs with few or no fees. (This is how I access cash, and it works especially well when I am traveling, even overseas.)
Try your credit card. If your bank account is already tapped out but you still need cash, consider who you need to give the cash to. If the recipient will take a credit card, that’s still a better option than a cash advance.
Use your credit card to buy debit cards. In some situations, you can pay your bill with a debit card but not a credit card. In this case, you can purchase debit cards with your credit card. Drug stores, supermarkets, and even some gas stations will allow customers to use their credit cards to purchase debit cards (i.e., gift cards) of up to $500. There’s a one-time fee of $4 to $7 for these cards, but it’s far cheaper than a cash advance from most credit cards.
Use a credit card with low cash-advance fees and rates. There are a few cards available that have much more reasonable terms for cash advances. For example, the PenFed Promise card, offered by the Pentagon Federal Credit Union, has a very reasonable 9.99 percent APR cash advance rate and no cash advance fees (or any others, for that matter). In addition, the Barclaycard Ring charges just 8 percent interest on cash advance, but there’s a flat $1 cash advance fee for each transaction. Just be aware that with both of these cards, interest will still be charged on the cash advance, even if the statement balance is paid in full.
Bottom line: Smart cardholders need to explore every possible option before taking a cash advance from their credit cards, but thankfully, there are alternatives.