At a Glance
When you need cash, especially if you need it quickly, you may wonder if there is a way to use your credit card to get it. The answer is yes, through a cash advance from your credit card. However, experts don’t recommend this option due to its cost, impact on your credit score, and red flags for lenders.
In this article, learn more about:
What is a cash advance?
Typically, you use credit cards for making purchases online or in stores. Your available credit is reduced by the amount you spend each time you use the card, and every month you repay the bill in full. If you carry a balance, you’ll accrue interest on that balance.
A cash advance is slightly different. This is when you use your credit card to withdraw cash as essentially a short-term loan against your credit limit. Unlike a typical credit card transaction, you’ll be charged an up-front fee that’s a percentage of the total cash requested, and you’ll start accruing interest right away.
Not all cards offer a cash advance option, but it can be used as a way to get cash in hand fast.
Can you withdraw cash from a credit card at an ATM?
Yes, the way you would get a cash advance using your credit card is from an ATM, though some financial institutions also offer this option.
Start by checking your cardholder agreement for your card, and look for a Cash Advance APR or Cash Advance fees. If these terms exist, you can likely use your card for a cash advance. Also look at your credit card statement for cash advance credit lines or cash advance credit limits, which outline the maximum amount of cash you can take out with an advance.
If you aren’t sure, you can always call your credit card company to confirm.
How to get cash from an ATM using a credit card
If you’ve decided that a cash advance is your only or best option, here are the steps to follow:
- Check to make sure your card allows cash advances. Check your cardholder agreement, credit card statement, or call your credit card company to understand if it’s an option.
- Check your limits. Most cards have a limit to how much you can withdraw with a cash advance. You can also see this on your credit card statement or by calling the company.
- Know your PIN. In some cases, you’ll receive a PIN when you receive your card in the mail. If you don’t have one, or have lost it, you’ll likely have to request a new one from your credit card company. You can usually do this through your credit card account online, or by calling the customer service number.
Keep in mind if you have to request a PIN, it can take 7-10 business days to get the PIN set up and mailed to you. It’s not something they can provide over the phone or immediately.
- Understand the fees and interest. Make sure you know the cost of making a cash advance withdrawal prior to doing so, including fees you’ll be charged and interest costs.
- Get the cash advance. Go to an ATM, insert your card, and enter your PIN when prompted. When given options regarding the withdrawal, choose the option “cash advance” or “credit card” rather than “checking” or “savings.” Then, enter how much you’d like to withdraw and get the cash.
- Pay it back. You’ll be charged a cash advance fee, as well as start occurring interest right away. Try to make your credit card payment as soon as you can to pay back the advance; otherwise, your credit card debt can start to increase dramatically and quickly.
Are cash advances a good idea?
Unless you’re desperate for cash in hand, you should avoid using your credit card for a cash advance for a few reasons:
- You’ll pay high fees. Typically, you must pay a fee based on the amount you borrow. This could either be a flat dollar amount, a percentage of the total withdrawal, or a combination of whichever is higher.
For example, if your card terms say you’ll owe $20 or 5% of the total, whichever is higher, you’ll owe $20 for withdrawing up to $400, but you’ll owe 5% for any amount above $400.
- No grace period. Typically, when you use your credit card to make a purchase, you don’t start accruing interest right away. In fact, you won’t be charged interest at all unless you carry a credit card balanced from month-to-month by not paying your balance in full. However, with cash advances, you’ll get charged interest as soon as you do the withdrawal, so extra costs will add up quickly.
- High interest rates. APR on cash advances is much higher than a normal credit card purchase, even up to 25% or more. Plus, since there is no grace period, you’ll start getting charged this high interest right away.
- Raises your risk. When lenders see you’re using cash advances, they may flag you as a high-risk borrower. Since most people only use cash advances when they are desperate for quick cash, lenders may not see you as financially responsible. This could lead to higher interest rates or difficulty getting high lines of credit or the best terms.
- Increased outstanding debt. When you take out a cash advance, the balance gets added to your credit card debt and shows up on your credit reports. Typically, the higher your credit card debt compared to your total available credit and income, the lower your credit score will be.
Cash advance alternatives
The cash advance option may not be recommended, but the good news is there are other options available you can try depending on your situation and needs:
- Use a bank balance transfer. Some credit cards have a 0% balance transfer APR offer. If you apply and are approved for the card, you can request a balance transfer with the issuer. Then, instead of transferring a balance from one card to another (as you’d do if you were paying off credit card debt), the issuer would send cash directly to your bank account.
Treated as a balance transfer, the amount becomes the balance of the card, and you’d pay it off at 0% APR.
- Get a personal loan. If you have a great credit score, you can qualify for a personal loan with a lower interest rate than you’d be charged with a cash advance. Personal loans can be used for just about anything, and they can come in a range of amounts from less than $1,000 up to $100,000.
The downside is while some personal loan lenders have a quick approval and fund transfer process, this isn’t a great option if you need cash immediately.
- Borrow. If you have someone you trust, like a close family member or friend, consider asking them if you can borrow the money. It may be an awkward ask, but would save you money in interest and fees. However, it’s critical you pay the money back in a timely manner.
Does a cash advance with a credit card cost money?
Yes, there are several costs associated with getting a cash advance with your credit card. First, you’ll pay a cash advance fee for withdrawing money. You could also owe more fees if you use an ATM. You’ll also start accruing interest on the amount immediately, as there is no grace period. Typically, this interest rate is much higher than for regular spending.
Can getting a cash advance impact my credit score?
Yes – while cash advances don’t show up on your credit report as a “cash advance,” the amount you withdraw can cause the percentage of available credit you’re using to increase. This is called your credit utilization ratio, and the higher your ratio, the more negatively your credit score can be impacted.