Table of Contents
How Cash Advances work
What’s the price?
When It Doesn’t Involve Cash
What is the point at which it makes sense?
The Bottom Line
Personal Credit Cards for Finance
Can you withdraw money from a Credit Card?
Cash advances from credit cards offer instant access to cash, however, they come at a price.
By Rebecca Lake
Updated June 06, 2021.
Written by Thomas J. Catalano
When you need cash because of an emergency or pay for bills, you might wonder if it’s possible to withdraw it from your card. Many credit card companies do allow you to draw funds from your card through an advance. While it can be useful in times of need however, cash advances have some drawbacks to consider. When using the credit card you have to obtain cash, you must take a look at the pros and cons.
The most important takeaways
A lot of credit card companies permit you to withdraw funds from your card through the cash advance.
Based on the card, you might be able to withdraw cash through depositing it in a bank account, using your ATM card or writing a convenient check.
Cash advances are often able to have higher APRs than balance transfers or purchases, and interest starts accruing immediately. They also typically have fees.
How do Cash Advances on Credit Cards Work
Typically, credit cards are meant to be used to make purchases. For example, you can use your credit card when you check out in shops or input your card’s number as well as expiration date when you purchase things online. When you purchase something, your available credit will be reduced by that amount until you pay your credit card charge.
Credit card cash advances differ in their operation. If your card permits them (and not all do), you might have a credit limit that is only for purchases and another limit for cash advances which will usually be lower than the limit for purchases. If you make an advance in cash is when you borrow money against your credit limit.
Additionally the cash advances start earning interest instantly, unlike purchases, where you typically have an additional grace period of 20 to 30 days in which to pay off your debt prior to interest accruing.
There are several methods to get cash advances, for example:
You can request a cash transfer using your credit card to your bank account
Cash withdrawals at ATMs
Write a check of convenience to yourself, and then cashing it at the bank
You should be able find the cash advance limit you have by looking through your most recent statement from your credit card. If you don’t see it, call your credit card company and inquire whether cash advances are a possibility on your card, and in case they are, what the limit is.
How Much Does it Cost to withdraw cash from an Credit Card?
Cash advances aren’t free. There are many expenses to consider before taking one.
First, there’s the cash advance fee. It’s a charge that charged by the card provider simply to make it easier to withdraw cash against the limit of your cash advance. It can be an unrestricted cost, like $5 to $10 or it could be a percentage of the amount, or greater. The amount can vary between cards.
There is also the possibility of paying additional fees if you’re withdrawing money from your credit or debit card at an ATM or bank branch. A ATM surcharge could be charged and you could also be required to pay a teller fee for this convenience.
The second part of the cost of cash advance refers to the annual percentage rate (APR). In most cases the cash advance APR is higher than the standard APR for balance transfers or purchases. In addition, as we mentioned earlier the interest begins accruing as soon as it is received.
This is something to keep in mind if you’re looking for an affordable method to obtain cash. Compared to a short-term personal loan such as a credit card an advance in cash, it could result in a more expensive interest rate.
As with purchases, there’s no grace period for credit card cash advances. Interest begins accumulating right away.
When Cash Advances Do Not Require Cash
In certain instances it is possible to treat transactions as cash advances, even if you’re not transferring cash. For example, if , for instance, you connect your credit card with the bank account to provide overdraft protection any money that’s used to pay for overdrafts will be considered a cash loan. It is also possible specific transactions such as the use of your credit card to purchase cryptocurrency, will be considered cash advances instead of purchases.
For that reason, it’s beneficial to review your credit card conditions and terms carefully to ensure you know what isn’t considered to be a cash advance.
If you make a payment on your credit card bill, the minimum amount due will be applied to your purchase balance first. Any additional payments are applied to the balance with the highest APR following. Therefore, if you have a purchase balance on your card it could be necessary to pay it off in full before any payments are transferred to the cash advance.1
When Does It Make Sense to withdraw cash from a Credit Card?
The option of withdrawing money via your credit cards might appear to be a viable alternative if you’re in a tight spot financially. In the case, for instance when your car is broken down and you have to pay for towing from a company that doesn’t accept credit cards, then it may be your only choice.
If the issue isn’t urgent, you may consider alternative options to obtain cash, as advances on credit cards could be costly. For instance, you might consider:
The application process for an unsecure personal loan
borrowing money from relatives or friends
The process of obtaining a home equity loan
Withdrawing money from an IRA or making the opportunity to take a 401(k) withdrawal, or taking out a loan
Liquidating CDs or selling other assets to raise money
These options all have advantages and disadvantages, just like a credit card cash advance. Tapping retirement accounts, like, can be an easy method to access cash however it can also trigger tax penalties. If it does however, you’re still reducing the retirement savings. Home equity loans may offer low interest rates, but you’re also putting your house on the line as collateral. The borrowing of money from family and friends can give you money interest-free, but it could cause problems with your relationship if you can’t pay it back as agreed.
A 401(k) loan essentially means borrowing money from yourself. However, keep in mind that if you quit your job for any reason before the loan is paid back in full, you’ll need to repay it promptly or it’ll be treated as a taxable distribution.
The Bottom Line
Cash advances on credit cards offer some benefits, but they are expensive when compared with other ways to get money. If you require funds, but it’s not a dire emergency, take some time to investigate other options prior to committing to a cash advance. And if you do need to withdraw cash from your card make sure you pay off the balance as quickly as you can to reduce costs of interest.
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