How to get cash from an ATM with a credit card

For most credit card users, being able to withdraw cash from an ATM seems like a revelation. After all, who doesn’t want to be able to borrow cash from their credit card every once in a while when the bank account is running low on cash?

But withdrawing cash from an ATM using your credit card isn’t something you should get used to. The main reason? Banks see this as risky behavior, and aside from costing you big bucks in interest payments and fees, getting cash advances on a regular basis can also hurt your credit score. We have put together in detail what you need to know about using your credit card at ATMs and why cash advances from your credit card issuer should only be used in emergencies.

Can you use a credit card to get cash from an ATM?

Yes, you can use a credit card to withdraw cash from an ATM. Unlike withdrawing money from a debit account, withdrawing cash from your credit card is tantamount to receiving a cash advance — which comes with its own unique costs, including higher interest rates and increased fees. While many credit cards allow you to withdraw cash from an ATM, don’t make it a habit.

Because credit card cash advances are usually transferred to a different (and much smaller) line of credit than your other credit card purchases, they can also disproportionately affect your credit score. All of these circumstances lead banks to view cash advances as risky behavior, which is why withdrawing cash from an ATM using your credit card is best reserved as a worst-case scenario, and not just something you do instead of using your debit card.

What is a cash advance?

A cash advance is a way to borrow cash against your line of credit. Not all credit card companies offer cash advances, but many do. The most important thing to keep in mind is that cash advances are often treated differently than regular credit card use and they usually cost more than a regular ATM transaction. And there will be a cash advance limit.

For example, many cash advances come with higher interest rates (also called cash advance APRs), which can be as high as 25-30%. This interest is also usually credited to your account immediately and without the grace period of 20 days that is usual with other credit card transactions. You should study this information more closely on your credit card statement.

This means that even if you pay off your credit card bill in full every month, using cash advances is almost a guarantee that you’ll owe a hefty percentage of interest on the cash you’ve withdrawn during that billing cycle, which translates easily credit card debt.

Added to this is the high cash advance APR, a credit card company often charges a cash advance fee at the time of withdrawal. This can be a $5-10 flare rate fee or a percentage of the cash amount you withdraw, whichever is higher. You may also have to pay an ATM surcharge if you advance the cash from a bank that is not also your card issuer.

Aside from all the fees, it’s important to note that cash advances usually come from a different line of credit than your other credit card purchases. This line of credit is typically much smaller, which means that even a relatively insignificant credit card cash advance can have a much larger impact on your credit utilization ratio, and in turn negatively impact yours credit-worthiness.

Most banks see you as a greater credit risk after making a cash advance, as they’re generally only used as a last resort when someone needs cash but can’t afford to withdraw it from their checking account.

How to use your credit card at the ATM

If you want to withdraw money from an ATM with your credit card, follow these steps:

  1. Insert your credit card into the ATM
  2. Enter your credit card PIN – make sure you have one before beginning the process.
  3. Choose the “Cash Withdraw” or “Cash Advance” option
  4. Select the “Credit” option (when prompted to choose between Check, Debit, or Credit)
  5. Enter the amount of cash you wish to withdraw
  6. Accept any associated fees associated with the transaction
  7. Follow all the on-screen instructions to complete the transaction, and don’t forget to take cash and the receipt with you.

Using your credit card at an ATM is not much different than using a debit card. Simply follow all the instructions at the machine to withdraw cash, then accept the additional fees or charges and collect your cash and receipt.

What to consider before taking a cash advance

Higher interest rates, cash advance fees, and negative effects on your credit rating are the top three consequences of a cash advance on credit.

Higher interest rates

Before you take out a cash advance, there are a few things you should consider. The first of these are the higher ones Interest charges. Since most cash advances come with an APR of 20-30% (with no grace period), you’re almost guaranteed to pay it. This means that a $500 cash advance could cost you an additional $150 in interest.

Cash Advance Fees

Along with the increased interest rates, many banks charge a fee that is either a flat $5 to $10 or a percentage of your withdrawal amount. Be sure to read the fine print and understand what fees you will be charged before making a cash advance.

Negative impact on creditworthiness

Because cash advances are typically drawn from a different, smaller line of credit than your credit card purchases, you can increase your credit utilization rate relatively quickly, which can lead to a deterioration in your credit rating.

In general, most banks consider those who use cash advances to be at greater credit risk because they are likely to use the funds to cover an expense that requires cash but cannot afford to pay with their debit card or checking account. All of these things can negatively impact your credit score and make it harder to apply for other forms of credit in the future.

Alternatives to cash advance

If you’re considering taking out a cash advance, it’s worth exploring other options that may cost less and can also help avoid hurting your credit score. Here are a few such alternatives to cash advances.

debit card

If you need cash and can afford to withdraw it from your account, a debit card is by far the best option. You can use your debit card at an ATM or bank to quickly withdraw the amount of cash you need or even pay online.

You can also use the checking account linked to your debit card to either deposit or cash a check and then use that money to make a purchase or payment.

Peer to peer payment apps

With apps like Venmo or PayPal (among others), you can pay back a friend or family member who also uses the app without having to take out a cash advance. Use these apps to request payments from friends who owe you money, or to send a payment for anything from a meal to shared living expenses like rent or utilities.

private loan

For those who need larger amounts of cash and cannot afford to withdraw that amount from their checking account, consider a private loan. With personal loans, you can access a lump sum immediately upon approval, without the higher interest rates (most personal loans have interest rates around 10%) or the potential damage to your credit score. Most personal loans also have a more reasonable grace period and repayment schedule than cash advances.

For emergencies only

While it might be tempting to use cash advances instead of other payment methods, it really is something best saved for emergencies. Due to the higher interest rates, fees, and potential damage to your credit score, you should use an alternative payment method such as a debit card or even a personal loan whenever possible to avoid unexpected fees and interest payments.

Contributor Larissa Runkle writes frequently for The Penny Hoarder on finance, real estate and lifestyle topics.


Comments are closed.