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Most credit card lenders offer cardholders the ability to take out cash using an ATM. It’s called a cash advance, and it comes with some major downsides and hefty fees. Cardholders can use a credit card at nearly any ATM and withdraw cash as they would when using a debit card, but instead of drawing from a bank account, the cash withdrawal shows up as a charge on a credit card. Forbes Advisor recommends against using a credit card for a cash advance.
Can You Use a Credit Card At an ATM?
Although it’s not a recommended practice, a credit card may be used at an ATM to withdraw cash. Taking cash from an ATM using a credit card is called a cash advance and not only involves a cash advance transaction fee (often 3% to 5% of the transaction amount) but is also subject to a separate, often much higher, cash advance APR.
Because cash advance transactions begin to accrue interest the same day a transaction is made, high fees are typically unavoidable when using a credit card to withdraw cash from an ATM.
What Is a Cash Advance?
If you withdraw cash from an ATM using a credit card is a cash advance. The cardholder is essentially purchasing cash from the credit card company as opposed to purchasing an item from a store. Money withdrawn from an ATM gets added to the account balance and will be reflected in monthly statements. One-time fees and high interest rates often accompany cash advances. The average APR for a cash advance ranges from 22.99% to 24.99%, which is generally higher than APRs for regular purchase transactions. For these reasons, cash advances should be used only as a last resort or in an emergency situation.
Things To Consider Before Taking a Cash Advance
To avoid paying interest, with few exceptions, cardholders should pay off credit card balances every month. Always pay off cash advances as quickly as possible to avoid falling into debt.
High Interest Rates
Cash advances usually charge higher interest rates for regular purchases. Most credit card companies do not offer a grace period for cash advances, meaning a cardholder is not given time to pay off the balance before interest starts to accrue. Instead, interest accrues on the day the cash advance withdrawal is made. The cardholder faces a huge risk for exponential debt accumulation if cash advance balances are not paid off quickly.
One-Time Cash Advance Fees
Every time a cardholder withdraws money from an ATM, the credit card company will usually charge a fee. The exact fee will be described in the card’s terms and conditions—so read those carefully before making a cash advance withdrawal (or, better yet, before applying for the card). Cash advance fees plus an ATM fee can quickly add up for the cardholder making this an expensive method to obtain cash.
Negative Effects on Credit Scores
If not paid off quickly, taking out even one cash advance could lead to a decrease in credit score. Just as with regular purchases, cash advances will lower a cardholder’s available credit. If the account balance isn’t paid and interest continues to accrue daily, a cardholder’s credit utilization rate can skyrocket as available credit drops. This can lead to a decrease in credit score. Lenders may also view cardholders as a credit risk if they ever apply for a new card or want to take out a loan for a car or mortgage and available credit is reduced. Note that landlords also may consider credit when deciding to rent a room, apartment or house.
How To Get a Cash Advance on a Credit Card
It is a simple process to withdraw money from an ATM using a credit card. It’s like withdrawing money from an ATM using a debit card with only a few slight differences.
- Check the latest account statement to see how much money is available to withdraw. This can vary based on the card’s spending limit or the card may have a different cash advance limit.
- Go to an ATM and insert the credit card.
- Enter the credit card PIN (call the number on the back of the card to find out the credit card PIN or to set one up).
- Select the appropriate options if offered: “cash withdrawal” or “cash advance.”
- If asked to select between “credit” or “debit,” select “credit.”
- Enter the amount to withdraw.
- Accept any fees like ATM transaction fees and cash advance fees.
- Complete the transaction and take out the cash.
Alternatives to Cash Advances
Make sure to consider all the options before taking out a cash advance.
- Use a debit card instead of a credit card to take out cash from an ATM that’s in the bank’s network. This way the debit cardholder will avoid any fees for withdrawing cash.
- Interac e-Transfers are a good alternative for transferring money to friends or businesses. Many chequing accounts offer a certain number of Interac e-Transfers for free and more for a nominal fee ($1.25) after that. Some will even give you unlimited e-Transfers so you can send money via e-mail as much as you like.
- Consider applying for a personal loan if a large amount of cash is needed to pay off big expenses. According to Statistics Canada, the average personal loan APR is 8%
- Borrow money from a friend or family member. While there’s usually a risk to ask friends or family for financial help, as long as the borrower can pay off the loan in a timely fashion, it will likely be easier and cheaper than taking out a cash advance.
Bottom Line
For getting cash fast, cash advances should be considered a last resort among the options. A greater risk of falling into serious debt exists if the account balances aren’t paid off quickly. Interest rates for cash advances are higher than for regular purchases. Most credit card companies don’t offer a grace period, which means interest will begin to accrue on the day of the withdrawal. Before taking out a cash advance, try using a debit card, an Interac e-Transfer, a personal loan or even borrowing cash from a friend or family member if at all possible.
Frequently Asked Questions (FAQs)
How can I get cash from a credit card without charges?
Usually, the only way to use a credit card to withdraw cash without racking up much in interest fees nor any transaction charges on a cash advance is to find a card with no cash advance fees and to pay off a cash advance transaction on the same day it’s made. This may still incur a small interest fee, but it can be minimized by paying down your cash advance balance as quickly as possible.
How can I get cash off my credit card without a PIN?
There are few options beyond visiting an ATM when seeking cash from your credit card, but you do have some. Typically, withdrawing cash from a credit card without using a pre-established PIN at an ATM can be accomplished by visiting a branch of your card-issuing bank in person and requesting a cash advance from a teller. You may also be able to request a cheque or bank transfer from your issuer, but which options exist will likely be issuer-specific—call the number on the back of your card to ask about your options.
Can you get cash from a store credit card?
You can typically only get cash back from a store credit card if the card offers cash advances. Many closed-loop store cards do not offer cash advance options. Those co-branded store cards that do offer cash advances are more likely to be network-associated cards for making purchases or transacting with vendors other than the card’s co-branding store.
