Is Paying a Bill With a Credit Card Considered a Cash Advance?

Paying bills with a credit card offers convenience and can help you earn rewards. However, you need to be careful because some bill payments may be treated as cash advances by card issuers. Cash advances typically carry high interest rates and fees, so you want to avoid them if possible. In this article, we’ll explain what constitutes a cash advance and when paying bills with a credit card will be treated as one.

What is a Cash Advance?

A cash advance is when you use your credit card to access cash, rather than to make a normal purchase. The most common examples of cash advances include:

• Withdrawing cash from an ATM using your credit card
• Getting cash back when making a purchase at a retail store
• Using a convenience check from your credit card company
• Transferring money from your credit card to a bank account
• Using your credit card for overdraft protection on a checking account

Cash advances don’t qualify for the interest-free grace period that applies to purchases. Interest starts accruing immediately when you take a cash advance. Cash advances also come with fees, either a flat fee or a percentage of the transaction amount. For example, you may pay 5% of the total or $10 per cash advance, whichever is greater.

When Does Paying a Bill Count as a Cash Advance?

Simply making a payment on your credit card bill does not count as a cash advance. Normal bill payments are treated as regular purchases. However, some types of bill payments made with a credit card may be considered cash advances:

• Rent payments – Paying rent with a credit card is often coded as a cash advance because you are accessing cash to pay your landlord

• Mortgage payments – Mortgage payments made with a credit card are generally treated as cash advances. The card issuer sees this as you getting a cash loan to make the mortgage payment.

• Car payments – Using your credit card to make a payment on an auto loan is considered a cash advance by most card issuers

• Utilities – Paying bills for utilities like electricity, gas, water, cable or phone services with a credit card can sometimes lead to a cash advance fee. But not all card companies treat utility payments as cash advances.

• Government fees – Using your credit card to pay government fees, fines or taxes often incurs cash advance fees from card issuers.

• Peer-to-peer payments – If you use a credit card to send money to other people through PayPal, Venmo or other apps, it may code as a cash advance.

• Overdraft protection – When you link a credit card to your checking account for overdraft protection, overdraft payments on the card are considered cash advances.

Tips to Avoid Cash Advance Fees on Bill Payments

To prevent a bill payment from being treated as a cash advance follow these tips

• Check with your card issuer about their specific policies on bill payments coded as cash advances. Find out which types of bills are at risk.

• Consider paying rent, mortgage, loans or bills at risk of cash advance fees using a bank account instead of a credit card.

• Use your credit card sparingly when paying utilities, taxes or other bills that may be considered cash advances.

• Pay your credit card bill with a bank account rather than another credit card to avoid the payment being considered a cash advance.

• When available, use the card issuer’s online bill pay directly through their website rather than writing a check.

• With peer-to-peer apps, use your debit card or bank account to transfer money rather than a credit card.

• Opt out of overdraft protection if it involves linking your credit card. Use savings or money market accounts for overdraft protection instead.

By understanding which types of bill payments your card issuer treats as cash advances, and avoiding those transactions, you can pay bills conveniently with your credit card and still steer clear of costly cash advance fees. Careful use of your credit card for bill payments allows you to earn rewards and benefits without taking on expensive cash advance charges in the process.

The Bottom Line

Paying bills with your credit card is usually fine and won’t be considered a cash advance. But some types of bill payments may be treated as cash advances by your card issuer, including rent, mortgage, car payments, utilities, taxes, and peer-to-peer transfers. These transactions essentially provide cash to pay the bills, rather than simply making a purchase on the card.

Cash advances have high interest rates and fees, so it’s best to avoid them. Check with your card issuer to understand their specific cash advance policies on bill payments. Consider paying high-risk bills using bank accounts instead of credit cards. And use cards sparingly when paying utility bills, loans, and other expenses that may be deemed cash advances. With proper awareness and precautions, you can safely use credit cards for bill payments without incurring costly cash advance charges.