Table of Contents
How do Cash Advances work
What’s the price?
If It Doesn’t Require Cash
What is the point at which it makes sense?
The Bottom Line
Personal Credit Cards for Finance
Can You Withdraw Money From your credit Card?
Cash advances on credit cards provide fast access to money however, they come at a price.
By Rebecca Lake
Updated June 06, 2021
Reviewed by Thomas J. Catalano
When you need cash because of an emergency, or to pay your bills, you could wonder if it’s possible to take it out of the credit card you have. Many credit card companies do allow you to draw money from your account via a cash advance. While it can be useful when you need it, cash advances also have some drawbacks to consider. Before making use of cards with credit to obtain cash, it’s important to weigh the pros and cons.
Important Takeaways
A lot of credit card companies permit you to withdraw funds from your credit card via a cash advance.
Depending on the card, you may be able withdraw cash by depositing it into the bank account of the ATM card or by writing a convenience check.
Cash advances may have higher APRs than balance transfers or purchases and, as they are credited with interest, it begins to accrue immediately. Plus they often have fees.
How Credit Card Cash Advances Work
Typically, credit cards are meant to be used for making purchases. For instance, you use your credit card when you check out at the store or enter the card’s number and expiration date when you purchase things on the internet. When you purchase something the credit you have available is reduced by that amount until you have paid your credit card charge.
Cash advances on credit cards work differently. If your card allows for them (and not all cards do), you might have one credit limit for purchases and another limit for cash advances, which is usually lower than your purchase limit. If you choose to take an advance in cash is when you borrow money against the credit limit.
What’s more Cash advances begin accruing interest immediately–unlike purchases, which typically allow a grace period of 20 to 30 days in which to pay off the bill prior to interest accruing.
There are a number of ways to take an advance in cash, such as:
You can request a cash transfer using your card into your bank account
Withdrawing cash at an ATM
Making a convenience check for yourself, and then cashing it at the bank
You should be able to determine your cash advance limit by looking at your latest credit card statement. If you don’t see it, you can call your credit card company and ask whether cash advances are an option for you and, in case they are, what the limit is.
What is the cost to withdraw cash from a Credit Card?
Cash advances aren’t cheap. There are several costs to be aware of when you take one.
First, there’s the cash advance fee. This is a fee charged by the card provider simply for the convenience of withdrawing cash from your cash advance limit. It could be an unrestricted cost, like $5-10 or a percentage of the advance of money, whichever is greater. The amount can vary between cards.
You could also pay additional charges if you withdraw money from your credit card an ATM or branch of a bank. There is an ATM surcharge might be applicable, or you might be required pay a teller charge to use this service.
The second part of the cash advance cost equation is the annual percentage rate (APR). In most cases the cash advance rate is higher than the regular APR for purchases or balance transfers. And, as mentioned above, interest starts accruing immediately.
That’s important to keep in mind if you’re looking for a low-cost way to obtain cash. In comparison to a personal loan like a cash advance, a cash advance could be a lot more expensive and carry a more expensive interest rate.
Unlike purchases, there is no grace time for cash advances. Interest begins accumulating right away.
When Cash Advances Don’t Involve Cash
In some cases transactions, they can be regarded as a cash advance even if you’re not withdrawing cash. For example, if you connect your credit card with a bank account for protection against overdrafts, any money used to pay for overdrafts will be considered a cash loan. It is also possible that certain transactions, for instance, using your card to purchase cryptocurrency, will be considered cash advances and not as purchases.
It’s helpful to read your credit card terms and conditions thoroughly so that you are aware of what is and isn’t considered to be a cash advance.
If you pay on your credit card, the minimum amount due will be applied to your purchase balance first. Any additional amount is added to the balance that has the highest APR following. So if you already have a balance of purchase on your credit card and you want to pay it off in full before any payments are added to your cash advance.1
When Does It Make Sense to Withdraw Cash From the credit card?
Cash withdrawals via your credit cards may seem like a good option if you’re struggling financially. For example, if your car breaks down and you need to pay for towing from a company that doesn’t accept credit cards, it may be your only choice.
However, if the need isn’t urgent, you could be able to explore alternative options to obtain cash, as a credit card advance is costly. For instance, you might consider:
The application process for an unsecure personal loan
The borrowing of money from friends or family
Incorporating a home equity loan
When you withdraw money from an IRA or taking an 401(k) withdrawal or loan
Liquidating CDs or selling other assets to raise funds
Each of these options has pros and cons, just as a cash advance. For retirement accounts, for example is a simple way to get money but it could also result in tax-related penalties. Even if it doesn’t mean you’re losing your retirement nest egg. Home equity loans are a great option for low-interest rates, but you’re putting your home on the line as collateral. Borrowing from friends and family may put money in your hands without interest, but it can cause problems with your relationship when you don’t repay the loan in the manner agreed upon.
Note
A 401(k) loan essentially means borrowing money from your. But bear in mind that if you decide to quit your job due to reasons beyond the time that the loan is paid back, you’ll have to repay it in full and fast or it will be treated as a tax-deductible distribution.
The Bottom Line
Cash advances on credit cards offer some benefits, but they are expensive when as compared to other options to obtain money. If you’re in need of funds, but it’s not a dire need, it’s a good idea to research your other options before committing to a credit card cash advance. If you do decide to withdraw cash from your credit card make sure you pay off the balance as fast as you can to reduce cost of interest.
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