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When you're in need of cash, whether it's from an unexpected expense or a sudden job loss, heading to the ATM and withdrawing money from your credit card sounds like a quick fix.
This is called a cash advance, and although many credit cards allow you to do this, the negative financial consequences should make you think twice.
Below, Select explains what exactly it means to use your credit card to borrow cash as an advance, and why it's not worth it.
How cash advances work
Cash advances let cardholders borrow money against their card's line of credit. They essentially act as a short-term loan and can be accessed by withdrawing cash at an ATM with your credit card's PIN number, by requesting one in-person at your bank or by writing a convenience check (if your card provides them) to yourself and then cashing or depositing it.
You can check your credit card statement or call your card issuer to find out your cash advance limit.
Why they aren't recommended
Here are two reasons why experts don't recommend cash advances.
1. They're very expensive
The cost to withdraw money from a credit card can add up quickly. Since you are borrowing the money rather than withdrawing like you normally would from a checking account, the credit card company will charge you fees and interest rates until you pay back the loan. And unlike having at least 21 days to pay off a credit card purchase in full before incurring interest, there is no grace period for cash advances. That means you will be charged interest starting from the date you withdraw a cash advance.
The fees to consider on cash advances are the monthly payment, the interest rate on that monthly payment, the cash advance fee (usually 3% or 5% of the total amount of each cash advance you request) and the ATM or bank fee (depending on what method you choose). Keep in mind that the interest rates for cash advances are usually steeper than the rate you pay on purchases or balance transfers.
For example, the Blue Cash Preferred® Card from American Express (which requires good or excellent credit and ranked as Select's best credit card for grocery shopping) has a variable APR of 19.24% - 29.99% on purchases, and a 29.99% APR on cash advances (see rates and fees). Terms apply. But on a card such as the Capital One QuicksilverOne Cash Rewards Credit Card (which is a good choice for fair and average credit applicants to earn cash back), the APR on purchases is the same as the cash advance APR: 29.99%.
2. They can impact your credit score: Cash advances from your credit card won't show up on your credit report as their own line item, but they can harm your credit score if the amount you withdraw causes the percentage of available credit you're using, also known as your credit utilization rate, to increase. This could tell lenders that you are using more credit than you should while not paying it off.
For rates and fees of theBlue Cash Preferred® Card from American Express, click here.
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
FAQs
Using your credit card at an ATM can be convenient when you need to withdraw cash. But there are a number of cons to consider: Additional costs: You may pay a cash advance fee and any applicable ATM fees. Higher interest rate: Your issuer may charge a higher APR on the cash advance than it does for purchases.
Is it recommended to withdraw cash from credit card? ›
Taking a cash advance may not impact your credit score, but the high charges associated with cash withdrawals drive up monthly payments. Failure to pay the minimum due amount can affect your credit score adversely. Be sure to make your payments on time! Most banks offer rewards to Credit Card holders.
Why shouldn't you withdraw cash from a credit card? ›
Withdrawing cash (also known as a cash advance) from a credit card can have a negative impact on your credit score. Lenders may look at this unfavourably as it can be an indication of poor money management especially if there are multiple cash advances in a short period of time.
Why would you not recommend a cash advance from a credit card? ›
Cash Advances Don't Have a Grace Period
Credit card purchases have a grace period in which you'll have about a month to pay back the money you borrowed interest free. However, most cash advances don't have a grace period, and interest will start to accrue the same day you take your advance.
Why can't I take cash out of my credit card? ›
Check your credit card's terms or contact the company to find out what happened. If you're having trouble getting cash from a credit card, it's possible that the transaction put you above your credit card's limit for cash withdraws, which is known as a cash advance.
How much cash can I pull from a credit card? ›
Cash advances are typically capped at a percentage of your card's credit limit. For example, if your credit limit is $15,000 and the card caps your cash advance limit at 30%, your maximum cash advance will be $4,500.
What is the maximum cash withdrawal from a credit card? ›
How much of your limit you have left to use: The amount you have left to spend on your credit card can affect the amount you can withdraw from your credit card. Your credit card's cash advance limit: Most providers set a maximum percentage of your credit limit that you can withdraw from, like 90%.
What happens if you withdraw money from a credit card? ›
With a cash advance, the amount you withdraw against your credit limit is added to your card's balance. And it has to be repaid like other purchases you make with your card. Issuers generally charge higher fees and interest rates on cash advances than they do for typical credit card purchases.
How to withdraw cash from a credit card without fees? ›
No, you can't withdraw cash on a credit card without paying fees. But there are a few ways you can minimise how much you pay. We recommend you: Look into money transfer cards, which let you transfer money from your credit card to your current account.
Can I transfer money from my credit card to my bank account? ›
It is possible to use a credit card to transfer money into a bank account by using a cash advance or balance transfer check, but we can't recommend it. Cash advances are risky because of the high interest rates and costly one-time fees. Balance transfers can lead to more debt if they're not handled correctly.
The fees to consider on cash advances are the monthly payment, the interest rate on that monthly payment, the cash advance fee (usually 3% or 5% of the total amount of each cash advance you request) and the ATM or bank fee (depending on what method you choose).
How much does it cost to withdraw money from a credit card? ›
Every time you make a cash transaction, you will likely pay a fee. This fee can have a fixed minimum amount and may be up to 5% of the money you withdraw, depending on your credit card and provider.
How to turn a credit card into cash? ›
How to use a credit card at an ATM to withdraw money
- Insert your credit card into an ATM.
- Enter your credit card PIN.
- Select the “cash withdrawal” or “cash advance” option.
- Select the “credit” option, if necessary (you may be asked to choose between checking, debit or credit)
- Enter the amount of cash you'd like to withdraw.
The easiest way to get cash from your credit card is to use an ATM. Insert your credit card into an ATM, enter your PIN, choose the cash advance option, and enter your withdrawal amount. Cash advances can have higher APRs than purchases or balance transfers, and interest starts accruing on them right away.
Can I borrow cash from my credit card? ›
A credit card cash advance is a withdrawal of cash from your credit card account. Essentially, you're borrowing against your credit card to put cash in your pocket. However, there are costs to taking a credit card cash advance and, in some cases, limits on the amount you can withdraw.
Why won t my Credit One card let me withdraw money? ›
The most probable reason for a Credit One credit card cash advance denial is the lack of available credit. Credit One Bank limits the amount of funds you can get as a cash advance. Cash advances must not exceed 25% of your assigned credit limit and are limited to two transactions or $200 per day.
Is it better to withdraw cash from credit or debit card? ›
Use your debit card for ATM withdrawals
When you need cash from an ATM, you're probably better off using your debit card to withdraw funds, even if you must pay an ATM fee.
Is it bad to take money out of an ATM with a credit card? ›
When you get a cash advance from a credit card it'll increase your overall credit card balance. It may harm your credit score if the amount that you withdraw causes your credit utilization ratio to rise.
How much interest is charged on cash withdrawal from a credit card? ›
Finance Charges on Credit Card Cash Withdrawal
The rate at which the interest is charged is at the monthly percentage rate and will be levied from the date of the transaction till the repayment is made in full. Banks typically charge a rate of interest of 2.5% to 3.5% per month on all cash advances.
Does it cost more to withdraw cash from credit card? ›
The interest rate for cash advances is usually higher than the interest rate for purchases. When you take cash out on your credit card, interest is added to your account straight away, even if you pay off the balance by the due date. You may also be charged a cash handling fee of around 2% of the amount you withdraw.
