When you take out a cash advance, interest begins accumulating immediately because there is no grace period on these transactions. Interest is charged not only on the amount of the cash advance but also on the fees related to the cash advance.
An analysis of the credit cards in our database found the average APR on a cash advance is around 25%. This is significantly higher than the minimum purchase APR which averages between % and %. To get an idea of how much a 25% APR will cost, we calculated the interest on a $1,500 cash advance that was taken out on the first day of the billing cycle. The upfront fee of the cash advance is $75 ($1,500 x 5%), which increases the balance to $1,575.
For the first month, the interest owed on the cash advance is $33. When that interest is added to the balance, the amount of interest charged continues to increase over time. Extending that over six months gets us: