Credit card cash advances and convenience cheques in Canada: what they really cost

A credit card cash advance in Canada usually costs interest from the day you take the cash, at a rate often higher than the purchase rate, plus a cash advance fee, and it does not earn rewards. There is no interest-free grace period even if you pay the full balance by the due date. In an illustrative example, a $500 advance at 22.99% repaid after 30 days costs about $9.45 in interest plus the fee; left for a year it costs about $115 in interest. Convenience cheques drawn on your card account are usually treated the same way unless they are part of a promotion, and under the Bank Act a bank needs your express consent before sending them.

This guide belongs to credit card mistakes and official sources. Rates and fees are illustrative; your information box shows the real ones.

What counts as a cash advance

Transaction	Often treated as a cash advance?	Note
Withdrawing cash at an ATM with the credit card	Yes	Possible ATM operator fee too
Cash at a bank counter	Yes
Credit card cheque or convenience cheque	Usually, unless promotional	Requires your express consent to be issued
Balance transfer	Often charged at the cash advance rate unless promotional	See balance transfers
Buying foreign currency, money orders, traveller's cheques	Often	Depends on how the merchant codes it
Gambling transactions, lottery tickets, casino chips	Often	Some issuers block them
Certain transfers to payment apps or person-to-person transfers	Sometimes	Check the agreement
Paying another credit card or loan with the card	Usually not allowed, or treated as cash

Because coding is done by the merchant's processor, a purchase you think is ordinary can post as a cash-like transaction. Check the agreement's definition and your statement.

Why it costs more: three layers

Fee: a flat amount or a percentage of the advance, whichever is higher, charged when the advance posts.
Interest from day one: the Bank Act's grace period rule protects purchases paid in full by the due date. The Office de la protection du consommateur says the same for Quebec: credit charges on a cash advance are calculated from the date of the advance.
Payment allocation: if you also have purchases on the card, payments above the minimum go to the highest-rate balance first or proportionally, at the bank's choice (Bank Act s. 627.35). Under the proportional method, part of each extra payment goes to the cheaper balance while the cash advance keeps accruing at the higher rate. In Quebec, newer rules listed by the OPC require payments to go first to the highest-rate debt, such as a cash advance.

Worked example (illustrative)

$500 cash advance, rate 22.99%, fee of $5 (say).

Repaid after	Interest	Plus fee	Total cost	Equivalent annual cost
10 days	about $3.15	$5	about $8.15	about 59%
30 days	about $9.45	$5	about $14.45	about 35%
60 days	about $18.90	$5	about $23.90	about 29%
1 year	about $115	$5	about $120	about 24%

Short advances look cheap in dollars but are very expensive as a rate, because the fee is spread over only a few days. Interest calculations here are simple (daily rate × days); your card may compound.

Abroad, add the foreign transaction fee, often a percentage of the converted amount, and any ATM operator fee. A debit card or a travel money product is usually cheaper; see foreign transaction fees.

Credit card cheques

Some issuers send cheques that draw on your credit card account. Rules for banks:

a bank may not issue cheques on your credit card account without your express consent; oral consent must be confirmed in writing by the next statement, and using the card is not consent (Bank Act s. 627.32);
cheques are usually treated as cash advances unless a promotion says otherwise;
in Quebec, the OPC lists among its newer protections that a merchant may not send a document that activates existing credit unless the consumer requested it in writing.

If you receive cheques you did not ask for, shred them and tell the issuer you do not want them.

Cheaper alternatives

Savings or an emergency fund, even a small one, avoids cash advances for most surprises.
Paying the merchant by card instead of withdrawing cash to pay them, if they accept cards.
A personal line of credit from your bank, typically at a lower rate than card cash advances, if you qualify.
Asking the biller for a payment plan, for example a utility or a landlord.
A non-profit credit counsellor if you regularly need cash to cover bills.

Avoid payday loans, which can cost far more: the federal maximum for the payday exemption is $14 per $100 borrowed, an APR of about 365% on a two-week loan.

Frequently asked questions

Does a cash advance affect my credit score?

The advance itself is just a balance on your card, but it raises utilization, and frequent advances may be noticed by lenders reviewing your file.

Can I pay off just the cash advance first?

You can make a payment, but the bank's allocation method decides where amounts above the minimum go. Paying the whole balance in full stops all interest.

Is the cash advance rate shown in advance?

Yes. The information box on the application and agreement shows the applicable rates and the cash advance fee.

Does the 35% criminal rate apply?

Yes, the Criminal Code's 35% APR limit applies to credit, and fees count as interest. Very short advances with a fixed fee can produce high effective rates; if a charge seems excessive, ask the issuer for the APR and complain if needed.

Sources

Justice Laws Website — Bank Act ss. 627.32, 627.34 and 627.35; Criminal Code s. 347
Office de la protection du consommateur — credit charges on cash advances and new protections in Quebec
Financial Consumer Agency of Canada — cash advances and credit card cheques
Credit Counselling Canada — help with recurring cash shortfalls