PayPal Credit cards offer a convenient way to make purchases and manage expenses. But one feature that often causes confusion is taking out a cash advance on your PayPal Credit card.
What exactly is a cash advance? How much does it cost? And what should you watch out for with cash advances on PayPal Credit cards? This comprehensive guide will explain everything you need to know.
What is a Credit Card Cash Advance?
A cash advance is when you use your credit card to withdraw cash or send funds to your bank account. Essentially, you are getting an advance loan from your available credit limit.
With a traditional cash advance, you would visit an ATM or bank and withdraw cash on your credit card. But PayPal lets you transfer funds directly to your bank account online as a cash advance.
Cash advances allow access to cash when you need it quick. But they come with fees and downsides compared to regular credit card purchases.
How Do Cash Advances on PayPal Credit Cards Work?
PayPal allows cash advances in two ways:
Send Money Transfers – You can use your PayPal Credit account to send money to other PayPal users. This counts as a cash advance.
PayPal Cash Card – With the PayPal Cash debit card, you can withdraw cash from ATMs funded by your PayPal Credit balance.
In both cases, you are accessing cash from your available credit limit. There is no grace period and fees apply, unlike purchases.
When you take a cash advance on PayPal Credit, the funds do not go to your bank account directly. They go to your PayPal balance or debit card first.
Why Use a PayPal Credit Cash Advance?
Here are some of the main reasons you may need to take a cash advance on your PayPal Credit card:
- Cover emergency expenses when low on cash
- Pay bills when paycheck hasn’t come yet
- Pay a merchant who doesn’t accept credit card payments
- Deposit cash into another bank account you own
- Quickly withdraw cash from ATMs when needed
Just keep in mind that high fees and interest make cash advances costly ways to borrow money. They should only be used as a last resort.
Cash Advance Limits on PayPal Credit
PayPal Credit sets maximum limits on how much you can withdraw as a cash advance. The limits help reduce risk and excessive borrowing through cash advances.
Here are the current cash advance limits with PayPal Credit accounts:
- New accounts – $500 max during first 90 days
- Established accounts – Up to 25% of your credit limit
- Daily limits – $500 withdrawal limit per day
So if your credit limit is $2,000, your maximum cash advance balance would be $500.
These limits can prevent accruing large cash advance balances. PayPal may temporarily reduce your limits further if high risk activity is detected.
PayPal Credit Cash Advance Fees and Costs
The major downside of PayPal Credit cash advances are the fees involved. Here are the fees to expect:
- Cash Advance Fee – 5% of the advance amount, minimum $10
- ATM Withdrawal Fee – $3 per transaction at ATMs
- Foreign Transaction Fee – 3% on advances made outside the U.S.
In addition to fees, cash advance transactions begin accruing interest immediately. There is no grace period like with purchases.
The standard PayPal Credit APR of 19.99% – 29.99% applies. This interest compounds daily from the date of the advance.
Paying Off Cash Advances on a PayPal Credit Card
To avoid excessive interest charges, you will want to pay off cash advances quickly. Follow these steps:
Review your monthly statement for any cash advance balances or fees.
Pay at least the minimum payment by the due date to avoid late fees.
If possible, pay off the full cash advance balance within your next 1-2 billing cycles.
Avoid making new cash advances until any outstanding balances are repaid.
Set up autopay through your PayPal account to help ensure on-time payments.
With quick repayment, you can minimize the interest costs of a PayPal Credit cash advance. But repeated advances will quickly accumulate interest and fees, creating debt.
Alternatives to PayPal Credit Cash Advances
Because of the high costs, cash advances should only be used as a last resort when other options are not available. Here are some alternatives to consider first:
Personal loans – May have lower rates and no cash advance fees.
Paycheck advance – Some employers provide advance on your paycheck.
Borrow from family/friends – If able to, borrow from people close to you.
Balance transfer card – Transfer to a 0% intro APR credit card.
Credit line increase – Request higher limit for bigger purchases power.
Peer-to-peer loans – Services like PayPal Working Capital.
401k loan – Can borrow against your 401k balance.
Home equity loan – If you own a home, borrow against home equity.
Explore all other borrowing options before deciding on a costly cash advance via your PayPal Credit account.
PayPal Policies on Cash Advances
PayPal has specific rules and restrictions in place for cash advances made through their services:
Cash advances can only be sent to confirmed PayPal accounts belonging to another person. You cannot send advances to yourself.
Advances can only be made up to the 25% credit limit maximum. Requests over the limit will be declined.
PayPal reviews accounts for risky transactions patterns that may indicate fraud or abuse of cash advances.
PayPal reserves right to decline or block any cash advances they deem as high risk transactions.
Cash advances are not eligible for PayPal Purchase Protection programs. You cannot file disputes.
Cash advances incur immediate interest charges from the day of transaction, with no grace period.
Be sure to follow PayPal’s cash advance policies to avoid issues or account limitations. Restrictions help protect against abuse of easy credit access.
Pros of PayPal Credit Cash Advances
Despite the drawbacks and fees, here are some potential benefits of PayPal cash advances:
Quick access to cash when urgently needed
Can pay bills or expenses that don’t accept credit cards
Don’t need to visit bank or ATM for cash withdrawal
Available even with poor credit compared to other loans
Can access extra funds up to credit limit cap
For short-term liquidity needs, the convenience may justify costs of a PayPal Credit cash advance.
Cons of PayPal Credit Cash Advances
Here are the biggest downsides to keep in mind with cash advances:
Expensive fees that add 5%+ onto the advance amount
Daily compounding interest starts immediately, no grace period
Cash limits can be low for new accounts or credit history
Repeated advances may indicate financial issues
Not eligible for PayPal Purchase Protection
Risk of cash advance debt cycles with slow repayment
With fees, interest, and lost protections, cash advances should only be used as an absolute last resort option.
Is a PayPal Cash Advance Right for You?
Before taking a cash advance on your PayPal Credit account, consider these key questions:
Is this a short-term emergency or recurring cash flow issue? One-time advances may be justified for emergencies. Recurring advances signal deeper issues.
Do you have available credit limit to cover the full advance amount? Advances up to the 25% limit will be permitted.
Can you repay the balance in full within 1-2 billing cycles? Cash advances cost more the longer they remain unpaid.
Have you explored lower cost alternative borrowing options first? Personal loans or 401k loans may provide lower cost access to cash.
Are outstanding credit card balances already creating financial stress? New cash advances will increase burdens.
Think critically before using credit card cash advances from PayPal or any provider. The quick cash access comes with long-term costs if used improperly.
Avoiding Cash Advance Scams
When getting a PayPal cash advance, beware of potential cash advance scams. Here are tips to avoid scams:
Never respond to unsolicited offers for cash advances. Legitimate lenders won’t randomly reach out with offers.
Verify the legitimate website and customer service number for PayPal or any other lender before providing info.
Never provide your credit card or bank account number to someone reaching out to offer a cash advance.
Beware advance fee scams that require upfront payments to receive funds. Legit lenders deduct fees from amount disbursed, not upfront.
If receiving an advance through PayPal, ensure the recipient account and transaction details are correct before sending funds.
Following basic precautions will help you avoid falling victim to predatory cash advance scams.
PayPal Credit cash advances offer quick access to funds when needed urg