What is a cash advance?

A cash advance refers specifically to a short-term cash loan that is obtained using a credit card. This financial service allows cardholders to withdraw cash up to a certain limit that is typically outlined in their credit card agreement. When a cash advance is taken, interest typically starts accruing immediately, and there is usually a fee associated with the transaction, which can make it an expensive method of borrowing money.

The nature of a cash advance contrasts significantly with other financial options. For instance, a withdrawal from a checking account does not involve credit and merely reduces the account balance. Similarly, an installment loan from a financial institution and a personal loan from a family member involve longer repayment terms and structured payment plans, typically with lower interest rates when compared to the fees and interest rates associated with cash advances. Thus, the unique characteristics of cash advances, which allow for immediate access to cash through credit, highlight why the answer is accurately identified as a short-term cash loan utilizing a credit card.