Table of Contents
How do Cash Advances work
How Much Does It Cost?
If It Doesn’t Require Cash
When does it make sense?
The Bottom Line
Personal Credit Cards for Finance
Can You Withdraw Money from a Credit Card?
Credit card cash advances offer instant access to cash, but at a cost
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 cash it out of the credit card you have. Some credit card companies permit you to withdraw cash from your card via the process of a cash advance. Although it’s a great option in a pinch however, cash advances come with a few drawbacks that you should consider. So before using your credit card to obtain cash, it’s important to weigh the advantages and disadvantages.
Some credit card companies let the withdrawal of funds from your account via the cash advance.
Based on the card, you may be able withdraw cash through depositing it in an account at a bank, or using the ATM card or writing a convenient check.
Cash advances can be more expensive than balance transfers, purchases or purchases and, as they are credited with interest, it begins to accrue on them immediately. They also typically have fees.
How Credit Card Cash Advances work
Typically credit cards are designed to be used for making purchases. For instance, you may use your credit card when you check out in shops or input your card number and expiration date to buy things online. When you purchase something, your available credit is reduced by that amount until you have paid your credit card charge.
Credit card cash advances are different. If your card allows for these (and not all do) it could be that you have a limit on credit for purchases and a separate limit for cash advances, which will usually be lower than your purchase limit. If you make an advance in cash you are borrowing against this credit limit.
What’s more the cash advances start earning interest instantly, unlike purchases, which typically allow the option of a grace period of between 20-30 days to pay off your bill before interest starts accruing.
There are a number of ways to take a cash advance, including:
You can request a cash transfer using your card into your bank account
Withdrawing cash at an ATM
Write a check of convenience to yourself and cashing it at a bank
You should be able identify your cash advance limits by checking your latest statement from your credit card. If you aren’t able to find it, call your credit card company to inquire whether cash advances are an option with your card and, if so, what your limit is.
How Much Does It Cost to Withdraw Cash From a Credit Card?
Cash advances aren’t for free. There are a variety of charges to be aware of when you take one.
The first is the cash advance charge. This is a fee which the company that issues credit cards charges for the convenience of withdrawing cash against the limit of your cash advance. It could be a flat fee, such as $5-10, or a percentage of the advance of amount, whichever is more. The amount could differ depending on the card.
There is also the possibility of paying additional charges when withdrawing funds from credit card at an ATM or branch of a bank. There is an ATM surcharge could be charged and you could also be required pay a teller charge for this convenience.
The second component of the cost of cash advance includes the annual percentage rates (APR). In the majority of cases, the cash advance APR is greater than the normal APR for purchases or balance transfers. In addition, as we mentioned earlier, interest starts accruing immediately.
This is something to keep in mind when looking for a cost-effective method to obtain cash. In comparison to a personal loan, for example the cash advance may be a lot more expensive and carry a greater 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 certain instances it is possible to treat transactions as cash advances, even if you’re not transferring cash. For instance, if you connect your credit card to an account at a bank for overdraft protection , any funds used to cover overdrafts could be considered to be a cash advance. You may also find that certain transactions, like the use of your credit card to purchase cryptocurrency, will be considered cash advances instead of purchases.
It’s beneficial to review your credit card’s conditions and terms carefully to ensure you know what isn’t considered a cash advance.
If you make a payment through your credit card bill, the minimum amount due will be added to your purchase balance first. Any additional payments are applied to the balance with the highest APR following. Therefore, if you have a balance of purchase on your card and you want to pay the balance in complete before making any payments applied to your cash advance.1
When is it a good idea to Withdraw Cash From your credit card?
The option of withdrawing money from your credit card might seem like a good alternative when you’re in a tight spot financially. For instance when your car is broken down and you have to pay a tow truck firm that doesn’t take credit cards, then it might be the only option.
If the issue isn’t critical, you might want to research alternative options to obtain cash as a credit card advance can be expensive. For instance, you might consider:
Applying for an unsecured personal loan
Borrowing money from friends or family
Taking out an equity home loan
When you withdraw money from an IRA or making the opportunity to take a 401(k) withdrawal or loan
Liquidating CDs or selling off other assets in order to raise money
Each of these options has pros and cons, just like a credit card cash advance. Tapping retirement accounts, like, can be an easy method to access cash but it could also result in tax penalties. If it does however, you’re still reducing 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. The borrowing of money from family and friends could give you money interest-free, but it could be a cause for relationship issues if you can’t repay the loan in the manner agreed upon.
Taking out a 401(k) loan essentially means borrowing money from yourself. Be aware that if you leave your job for reasons beyond the time that the loan is paid back in full, you’ll need to repay it in full almost immediately or it will be treated as a tax-deductible dividend.
The Bottom Line
Credit card cash advances have some benefits, but they can be costly compared with other ways to borrow money. If you’re in need of funds, but it’s not an situation, you should take the time to investigate other options before committing to a credit card cash advance. And if you do need to withdraw cash from your account, try to pay off the balance as fast as you can to reduce cost of interest.
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