What is a cash advance?

A cash advance allows you to access money by borrowing against future income or a credit line. Essentially, it's a way to get funds that aren't currently available in your account. While this can be incredibly helpful when you find yourself short on cash, it's important to understand the different types and their implications.

Types of cash advances: Understanding your options

Credit card cash advances

For credit card accounts, a cash advance means borrowing directly from your available credit limit. Unlike a regular purchase, these typically come with specific fees and a higher interest rate that starts accruing immediately, often without a grace period.

Cash advance apps & payday loans

These non-credit-card cash advance options, often found through apps or storefront lenders, are closer to short-term loans designed to be repaid quickly, typically on your next payday. These may come with transparent flat fees and no interest rates to calculate. Since the costs associated with these cash advance types are generally static and transparent, it is considerably easier to distinguish between their pros and cons.

Read more: How cash advance apps work

How do cash advances work?

When you need a cash advance, you usually need it quickly. While the specific process varies by lender and type of advance, most aim to make the process fast. Generally, you'll start by reviewing the terms and conditions provided by your lender. You should understand exactly which fees to expect before committing to a cash advance. The amount of repayment you’ll owe, as well as a due date, should also be clearly displayed.

Your lender will review your request—whether it is a credit card issuer, a bank, or another financial institution. They will consider your deposit history, credit history, payment history, or other factors before potentially approving your advance. While typically fast, initial cash advance approval timelines can vary widely. This means that it’s generally a good idea to start this approval process before the cash is needed, not mid-crisis.

However, sometimes you’re unable to plan ahead, and instead need money today. In these situations, Varo Advance can help, offering advances of $20-$250 on the first day of becoming a customer when you link a qualifying account¹.

How quickly can I get a cash advance?

If your application is approved, you can typically expect to see the funds in your account within a day or two from most providers. For a credit card issuer, double-check its maximum wait times for approval and cash disbursement first; while some cards simply require you to visit an ATM to withdraw money, others may have a longer review period. Your potential waiting time should be carefully considered before putting in your request.

Varo makes it simple. By linking a qualifying account¹, customers can now receive their first advance on the same day they join. That’s right, money is deposited directly into your account for immediate spending—with no long waits. This can be a lifesaver when you're facing urgent bills or unexpected expenses like car repairs. And by qualifying now, you can start taking steps toward higher advance amounts (up to $500) so you're prepared when those time-sensitive situations arise.

Understanding cash advance fees & costs

The fees and/or interest you’ll pay on your cash advance depends heavily on the issuing lender and the type of advance. For a credit card cash advance, the fee structure may be expressed as something similar to, '$X or X% of the cash advance amount, whichever is greater'. In addition, many credit cards will charge you a higher interest rate on the cash advance than they would charge for normal credit card purchases. This interest often begins accumulating immediately, without the grace period typical for purchases.

If you pay off a credit card advance in full before the next payment cycle, you can typically avoid paying interest. However, other cash advances from some lenders won’t offer the same payment grace period and can start accumulating interest for purchases immediately. Because of this, fees can begin to add up quickly, even on a small advance amount.

Varo Advance¹ does it differently, with no interest charges—just a single transparent, flat fee on each cash advance received. Customers can get approved for an advance between $20 and $250 on the first day of becoming a customer after linking a qualifying account, and potentially work their way up to $500 advances over time.

Pros and cons: Is a cash advance right for you?

Using a cash advance is always a voluntary choice, and in the right circumstances, it can act as a much-needed safety net that provides peace of mind in tough situations. Because a cash advance is usually available immediately, it offers valuable financial flexibility for those on non-traditional pay schedules. If you’re paid biweekly, monthly, or even several months apart, cash advances can help fill small gaps.

However, determining whether a cash advance is the right fit for your financial needs depends on several factors. If you need cash fast, consider these three questions before deciding to move forward with your cash advance:

Is my financial need immediate, or can it wait? 

For time-based needs like groceries, gas for your vehicle, an important bill, or a date-sensitive expense, a cash advance may be appropriate. Make your decision by comparing costs and benefits. What are the costs of waiting for income versus the fees associated with your borrowed advance? If late fees and/or an overdraft charge would be more than the cost of the advance, then a money advance might be the right choice.

Can I repay the costs and/or fees?

A paycheck advance comes in handy, but it shouldn’t make your future payday look bleak in the process. When planning out your finances after a cash advance, think beyond the financial challenge at hand. Don’t forget to account for both immediate costs (upfront fees) and future costs (which may include higher credit card interest, automatic repayments, and more).

Can I use this money the way I need to?

If the funds don’t hit your account when you need them, or you can only spend the cash in a specific way, then it defeats the purpose of a cash advance. Using a trusted, tech-savvy lender like Varo ensures you not only have the financial flexibility of a cash advance, but once qualified, you’ll also have immediate access to your money. Other cash advance providers may have built-in waiting periods that can be a day or longer.

How cash advances impact your credit score

It's a common question: will a cash advance affect my credit score? The answer depends on the type of cash advance and where you’re getting it from.

• Credit card cash advances: These can indirectly impact your credit score. Taking a cash advance increases your credit utilization ratio, which can temporarily lower your score. It also shows up on your credit report, and frequent cash advances might signal higher risk to lenders. However, making on-time payments to repay the advance helps maintain a positive payment history.

• Payday loans / Cash advance apps (like Varo Advance): Generally, these types of advances do not directly impact your credit score because they typically don't involve a credit check and are not reported to major credit bureaus. This can be a benefit for those who need to borrow money with bad credit or no credit history.

• Important note: While non-credit-card advances may not directly affect your score, defaulting on repayment could lead to collection efforts that could eventually impact your credit.

Alternatives to a cash advance

If you need funds in a hurry, a cash advance is an excellent option, but it’s not the only one available to you. If you’re still not sure a cash advance is right for your situation, consider these other short-term financial solutions:

• Ask your employer or HR department for a direct paycheck advance. Many larger companies will work with established employees in times of need.

• Apply for niche credit such as Care Credit for medical costs or a store-branded credit account for appliance purchases.

• Seek out a personal loan from friends or family, complete with a written agreement and due date to avoid any miscommunication.

• Try out on-demand gig work, such as food delivery, for extra income when an unexpected bill comes due.

Read more: Cash advance vs personal loan vs payday loan

Get prepared with Varo Advance

Ready to experience the flexibility and peace of mind that a responsible cash advance can offer? With Varo Advance¹, you can get the funds you need quickly and easily, right in the Varo app. Don't wait until you're in a pinch—qualify today and be prepared for life's unexpected moments.

Now, Varo Advance customers can link a qualifying external account and access between $20 and $250 that same day, with the chance to build their cash advance limit up to $500 over time. Get 0.00% APR and only pay a single transparent, flat fee per advance. Customers can also choose when they pay the money back (between 15 and 30 days out), so your next paycheck doesn’t need to be tied up with repayment.

Get started today by opening a Varo Bank Account or click to learn more about Varo Advance!

1. Varo Advance (VA) is a small dollar line of credit. Initial limits range from $20-$250. Fees range from $1.60 - $40 based on loan amount, and deposits to your Varo Bank Account. No interest is charged. For full details see Terms and Conditions. Your current limit and applicable fees can be viewed in the Varo App. Only one outstanding advance at a time, must be repaid in full prior to requesting a new advance. Limits and eligibility evaluated daily and may change at any time. You must have an active Varo Bank Account with a positive balance, no delinquent VLOC or charged off Believe account in prior 6 months and one of the following: 1) receive Qualifying Direct Deposits (QDD) of $800+ to your Varo Bank Account current or previous calendar month (max line size $500). 2) A linked account with QDD of $800+ in the current or prior calendar month, average daily balance of $100 in the previous 30 days and active for at least 60 days (max line size $250) or 3) receive deposits of $800+ to your Varo Account in the previous 3 months (max line size $100). Add’l qualifications may apply.

Qualifying direct deposits are electronic deposits of your paycheck, pension or government benefits (such as Social Security or unemployment) from your employer or government agency to the extent that can be identified. Tax refunds and government stimulus payments, Person-to-Person payments (such as Venmo or Varo to Anyone), and funds deposited using a Varo routing number are not considered a direct deposit.