Most people know how to use a credit card to make purchases, but not many know how to withdraw cash from a credit card at an ATM. Applying for a cash advance on your credit card allows you to withdraw money from your credit card and use it to pay rent, repay friends and family, pay bills, and more.
Can you use your credit card to get a cash advance at an ATM? Absolutely! Should you? Unless you have to. Cash advances come with extra fees and high interest rates, so you should only use them as a last resort. Here’s what you need to know about how cash advances work, how to get cash from your credit card at an ATM, and what cash advance alternatives you should consider before withdrawing money from your credit card.
What is a cash advance?
A cash advance is a transaction that allows you to withdraw money from your credit card. Instead of using your credit card to purchase goods or services, you’re essentially using your credit card to make cash purchases. The money that you withdraw during a cash advance becomes part of your credit card’s balance.
Withdrawing cash from your credit card is one way to ensure you have money when you need it, but applying for a cash advance at an ATM can cost you money. You’ll have to pay a cash advance fee at the ATM, and any cash you withdraw will be charged a high interest rate.
In most cases, interest rates on cash advances are between 20% and 25% per year, and there is no grace period during which you can pay off the balance without being charged interest. immediately.
To minimize the cost of cash advances, pay off your credit card balance in full as soon as possible. The longer you leave a credit card cash advance unpaid, the higher your risk of accumulating high-interest credit card debt.
How to withdraw money from an ATM using a credit card
If you need to withdraw cash from your credit card at an ATM, follow these steps to request a cash advance.
- Insert your credit card into the 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 card, or credit)
- Enter the amount of cash you want to withdraw
- Accept any fees associated with the transaction
- Complete the transaction and receive your cash
Using a credit card at an ATM works much the same way as using a debit card: just follow the instructions to withdraw cash, agree to fees and charges, and receive your money.
What to consider before accepting a cash advance
While you may have to take out a cash advance in an emergency, whatever your reason for taking your credit card to the ATM, make sure you plan to pay the advance back as soon as possible. With all this in mind, though, there are three big drawbacks to cash advances. Let’s look at a few:
Cash advance fee
First, banks charge a cash advance fee every time you use your credit card at an ATM. ATM fees are already higher than they’ve ever been, so paying an additional cash advance fee on an ATM transaction is an extra expense that should be avoided if at all possible. The exact fee charged will vary depending on the issuing bank.
Cardholders can find this information in their card’s terms and conditions, so be sure to read them carefully before accepting your cash withdrawal fate.
High Interest Rates
Interest rates on cash advances can be much higher than the interest rates credit card issuers charge you for purchases. And because there’s no grace period on a cash advance, interest accrues immediately. Interest on a cash advance can add significantly to your debt, especially if you carry a balance on your credit card from month to month.
Negative impact on credit scores
The third drawback to cash advances has to do with your credit score. Because taking out a cash advance reduces your available credit, be prepared for your credit score to drop. That means if your balance isn’t paid and you start accruing interest right away, your credit utilization ratio will go up and your credit score will drop. Also, because you typically only request a cash advance if you don’t have enough money in your checking account to cover expenses that require cash, lenders may view you as a higher credit risk.
Alternatives to cash advances
If you need cash and don’t want to pay the extra costs that come with a cash advance, you have a few options: If you have a debit card, you can withdraw money from an ATM without paying a cash advance fee, as long as you use an ATM in your bank’s network. You can also go to a bank branch and cash a check in person.
If you need to pay cash on your credit card because you don’t have enough money in your checking account to cover the bill, see if there are other ways to send money. Peer-to-peer payment apps like Venmo and Square Cash (often called Cash App) allow you to send money to friends and family. So if you need cash to pay a friend or relative back, you might be able to use Venmo or Cash App instead.
Keep in mind that both Venmo and Square Cash charge a 3% fee on credit card transactions, and some credit card issuers code peer-to-peer payments as cash advances, so it’s best to use a debit card or linked checking account with Venmo and Cash App whenever possible.
Finally, you could consider a personal loan. If you need cash quickly and don’t want to incur high cash advance costs, a personal loan can help you get the funds you need at a much more reasonable interest rate. As of August 2024, the average interest rate on a personal loan is just over 12 percent. Taking out a personal loan gives you a lump sum of money that you can use to pay rent, pay medical bills, or pay for any other expenses you need cash for.
One exception to consider
Don’t confuse cash advances with “cash-back credit cards,” which are rewards cards that offer cash back in the form of rewards that can be redeemed toward eligible accounts or as statement credits. However, some Wells Fargo cards allow cardholders to withdraw cash back at Wells Fargo ATMs. In that case, you’re not taking out a cash advance; instead, you’re redeeming a cash-back reward. There’s no need to consider cash advance fees or interest rates.
Conclusion
Remember: Always consider a cash advance as a last resort. Before withdrawing cash from your credit card at an ATM, it’s important to try all other options, such as debit cards, payment apps and personal loans. If the opportunity arises, you can also borrow cash from friends. Interest rates on cash advances tend to be higher than on regular purchases, so keep in mind the financial impact if you can’t pay off your account balance right away.
