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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
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.
Can you withdraw money from a credit card? ›
Getting cash from a credit card is one way to ensure you have money when you need it, but requesting a cash advance at an ATM can cost you. Expect to pay a cash advance fee at the ATM, and expect to pay a higher interest rate on any cash you withdraw.
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? ›
Not only do you incur fees for your cash advance transaction, but steep interest rates are tacked on, which are higher than the interest rates you pay for regular purchases on your credit card.
Should I say yes to cash advance on a credit card? ›
Deciding to get a credit card cash advance is a personal decision. But remember, cash advances typically come with additional fees and higher interest rates than other transactions. And that can make them costly, especially if you can't pay them back promptly.
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 get cash back from a credit card? ›
Yes, you can get cash back with a credit card in the form of cash-back rewards or through a cash advance. Most credit cards, however, do not allow you to get cash back at the register when you make a purchase (with one notable exception: see below).
Why I Cannot withdraw cash from 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.
What happens if I take a cash advance from my credit card? ›
When you take out a cash advance, you're borrowing money against your card's line of credit. You must repay this loan and the amount you transfer cannot exceed the current balance available on your credit card. The amount of the cash advance is then added to your credit card balance.
Do you get charged for withdrawing cash from a credit card? ›
Withdrawing cash on your card
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.
The Cash advance limit is a portion of the overall Credit limit, ranging from 20% to 40%. For instance, if your Credit limit is Rs 1,00,000 then you can withdraw between Rs 20,000 to Rs 40,000 as cash. The remaining balance can be used for Card transactions only.
How do I get cash from my credit card without cash advance? ›
Ask your card issuer for convenience checks. These are checks you can write that are tied to your credit card account. Wire money to yourself through a money transfer service, such as Western Union, and pay with your credit card. Purchase a money order with your credit card, if you can find a merchant that allows this.
How to convert cash from a credit card? ›
- Step 1: Call your credit card company. ...
- Step 2: Once connected, request to speak with a representative. ...
- Step 3: Specify the amount of money you wish to transfer to your bank account. ...
- Step 4: Provide the representative with your bank account details.
Perhaps one of the riskiest things to do with your credit card is to take out a cash advance. Interest starts accruing on the amount of cash you withdraw immediately — there's no grace period like regular purchases. And you'll likely incur a cash advance fee, which can be around 5% of the advance.
What are three reasons why you should avoid cash advances? ›
Key Points:
- Credit card advances are a very expensive loan.
- Cash advances start accruing interest immediately.
- Credit card advances can quickly put you deeper in debt.
In addition to interest, credit card companies may impose cash advance fees, elevating the overall cost of withdrawing cash and warranting careful consideration.
How can I get money from my credit card? ›
Steps involved (may vary slightly depending on your bank):
- Login to your bank's net banking portal.
- Navigate to the credit card section or transfer funds section.
- Look for an option like “transfer from credit card” or “cash advance.”
- Enter the amount you want to transfer and your bank account details.
To avoid charges when withdrawing money from a credit card, use it only in emergencies, repay the amount as quickly as possible to minimise interest, seek cards with low cash advance fees, and consider alternatives like personal loans or overdraft protection which might offer lower costs.
How much can you withdraw from a Capital One credit card? ›
Issuers usually cap the available amount at a percentage of your card's credit limit. So, if you have a $5,000 credit limit and your card issuer caps your cash advance limit at 30%, for example, then your maximum cash advance would be $1,500.
What is the cash advance limit on credit cards? ›
Your credit card cash advance limit will typically be lower than your credit limit, with a typical limit falling between 20% to 50% of your total spending limit. For example, if you have a $5,000 credit limit on your card, your cash advance limit will likely be less than $2,500.
