7 Credit Card Transactions That Are Actually Cash Advances

7 Transactions That Are Cash Advances

Using your credit card to withdraw cash from the ATM is the most obvious type of cash advance. However, there are a number of transactions that may not immediately seem like they're cash advances. Recognizing these cash equivalent transactions is important if you want to avoid high interest and costly fees (which may also be treated as a cash advance).

1. Using a Convenience Check

Some credit card companies send convenience checks in the mail. You may have the option of using the check to transfer a balance or get cash in your bank account. When you name yourself as the payee and cash the check or deposit it into your bank account, it's treated as a cash advance.

2. Buying Lottery Tickets or Gambling

Buying lottery tickets and gambling don't directly involve using physical cash, but they do offer the ability to win cash prizes. Credit card issuers often treat gambling purchases as cash equivalent transactions. This includes online gambling, race track wagers and casino gaming.

3. Buying Foreign Currency

While you can make purchases in other currencies with no problem (though you may be charged a foreign transaction fee), purchasing foreign currency, including cryptocurrency, with your credit card is considered a cash-like transaction. If you're traveling and need to exchange currency, use a debit card or cash from your bank account to avoid cash advance fees. You can also purchase traveler's checks ahead of time, but you'll need to use a debit card or cash.

4. Wire Transfers

Wire transfers involve moving money from one bank to another. If you use a credit card, you're essentially using the credit card issuer's funds to transfer money. For this reason, the wire transfer is treated as a cash advance.

5. Money Orders

Purchasing a money order with a credit card is treated as a cash advance. Some money order locations don't allow you to use a credit card and instead require you take out a cash advance first and then purchase the money order.

6. Person-to-Person Money Transfers

Using your credit card to send money through a money transfer app like Venmo, Paypal and Cash App may be considered a cash advance by your card issuer. Because you're essentially using your credit card to transfer money, it's very similar to withdrawing cash.

7. Overdraft Protection

You can use your credit card for overdraft protection for your checking account to avoid overdraft fees. However, credit card overdraft protection is treated as a cash advance since your card issuer is essentially transferring cash to prevent overdrafts.

Frequently Asked Questions

The Bottom Line

Without being aware of cash-equivalent transactions, you could unknowingly use your credit card for a transaction that's actually considered a cash advance. Even when it's convenient, cash advances aren't a cost-effective way to use your credit card.

If you need to improve your credit to access more affordable financing options, start by checking your credit report and credit score for free. This will help you figure out how to build a positive credit history and more favorable borrowing options in the future.