Using a credit card to make purchases is common knowledge, but not everyone is aware of how to obtain cash from a credit card at an ATM. When you request a cash advance with your credit card, you can withdraw money and use it for various purposes such as paying rent, settling debts with friends and family, and covering bills.
Yes, you can use a credit card at an ATM to get a cash advance. However, it is advisable to do so only when absolutely necessary. Cash advances come with additional fees and high interest rates, making them a costly option. Before resorting to a cash advance, it’s important to understand how they work, the process of getting cash from your credit card at an ATM, and consider alternative options.
Understanding Cash Advances
A cash advance allows you to withdraw money from your credit card, essentially turning your credit card into a source of cash. The amount you withdraw becomes part of your credit card balance.
While getting cash from a credit card provides immediate access to funds, it comes at a cost. Expect to pay a cash advance fee at the ATM, along with a higher interest rate on the withdrawn amount.
Cash advance interest rates typically range from 20-25 percent APR, with no grace period for interest-free repayment. It’s crucial to pay off the cash advance balance promptly to avoid accumulating high-interest debt.
Steps to Withdraw Cash from a Credit Card at an ATM
To request a cash advance at an ATM using your credit card, follow these steps:
- Insert your credit card into the ATM
- Enter your credit card PIN
- Select the “cash withdrawal” or “cash advance” option
- Choose the “credit” option if prompted
- Specify the amount of cash to withdraw
- Acknowledge any associated fees
- Complete the transaction and collect your cash
Using a credit card at an ATM for a cash advance is similar to using a debit card. Follow the instructions, accept the fees, and retrieve your money.
Considerations Before Opting for a Cash Advance
In emergency situations where a cash advance is necessary, it’s essential to have a plan in place to repay the amount promptly. However, there are three main drawbacks to be aware of:
Cash Advance Fees
Each cash advance transaction at an ATM incurs a fee imposed by your bank. Given the already high ATM fees, paying an additional cash advance fee adds to the overall expense.
Refer to your card’s terms and conditions for specific fee details before proceeding with a cash advance.
High Interest Rates
Cash advance interest rates are typically higher than those for regular purchases, and interest begins accruing immediately without a grace period. This can significantly increase your debt if the balance is not promptly repaid.
Impact on Credit Scores
Taking out a cash advance reduces your available credit, potentially lowering your credit score. Additionally, lenders may perceive you as a higher credit risk due to the need for a cash advance.
Alternative Options to Cash Advances
If you require cash without incurring the costs associated with a cash advance, consider these alternatives:
- Withdraw money from an ATM using a debit card
- Cash a check at a bank branch
- Utilize peer-to-peer payment apps for money transfers
- Explore personal loans for a lower-interest borrowing option
It’s important to note that some payment apps charge fees for credit card transactions, and certain issuers may categorize peer-to-peer payments as cash advances. Therefore, using a debit card or linked checking account is preferable in such cases.
Final Thoughts
Before resorting to a cash advance, exhaust all other options such as debit cards, payment apps, or personal loans. Consider the financial implications of high interest rates associated with cash advances and prioritize prompt repayment to avoid accumulating excessive debt.