A cash advance, often accessed through a credit card, provides you with immediate cash. However, it comes with significant costs, primarily in the form of high interest rates and fees. Unlike regular purchases on a credit card, cash advances typically do not have a grace period; interest starts accruing from the moment the transaction occurs. This calculator helps you estimate the interest costs associated with a cash advance based on its amount, the Annual Percentage Rate (APR), and how long you keep the balance before paying it off.
How the Calculation Works
The interest charged on a cash advance is calculated using a daily periodic rate, derived from the Annual Percentage Rate (APR). The formula is as follows:
Daily Periodic Rate: This is calculated by dividing the APR by the number of days in a year (typically 365).
Formula: Daily Rate = APR / 365
Interest for the Period: This is the product of the cash advance amount, the daily periodic rate, and the number of days the advance is held.
Formula: Interest = Advance Amount × (Daily Rate) × Number of Days Held
So, the full calculation is:
Total Interest = Cash Advance Amount × (APR / 365) × Number of Days Held
Why It Matters
Cash advances are generally one of the most expensive ways to borrow money. The high APRs, combined with the immediate start of interest accrual, can quickly inflate the cost of borrowing. Understanding these costs can help you make informed financial decisions and avoid unnecessary debt. For example, a $500 cash advance at 25.99% APR held for just 30 days can incur significant interest charges.
Example Calculation
Let's say you take a $500 cash advance with an APR of 25.99% and you pay it off after 30 days.
Daily Periodic Rate: 25.99% / 365 = 0.0712% per day (approximately)
Total Interest: $500 × (0.2599 / 365) × 30 days
Total Interest: $500 × 0.000712 × 30 ≈ $10.68
In this scenario, you would pay approximately $10.68 in interest for borrowing $500 for a month. Remember that additional fees may also apply for cash advances, further increasing the overall cost. Always check your credit card's terms and conditions for specific details on cash advance fees and interest rates.
function calculateInterest() {
var advanceAmount = parseFloat(document.getElementById("advanceAmount").value);
var apr = parseFloat(document.getElementById("apr").value);
var daysHeld = parseFloat(document.getElementById("daysHeld").value);
var resultDiv = document.getElementById("result");
var resultValueDiv = document.getElementById("result-value");
if (isNaN(advanceAmount) || isNaN(apr) || isNaN(daysHeld) || advanceAmount <= 0 || apr <= 0 || daysHeld <= 0) {
alert("Please enter valid positive numbers for all fields.");
resultDiv.style.display = "none";
return;
}
// Calculate daily periodic rate
var dailyRate = apr / 100 / 365;
// Calculate total interest
var totalInterest = advanceAmount * dailyRate * daysHeld;
// Format the result to two decimal places
resultValueDiv.textContent = "$" + totalInterest.toFixed(2);
resultDiv.style.display = "block";
}