Can I Do Cash Back With a Credit Card?
Confused about getting cash with your credit card? Understand the difference between cash advances, debit card withdrawals, and rewards, and their true costs.
Accessing cash with a credit card often leads to questions about “cash back” at a store. It is not possible to receive cash back from a credit card at a point-of-sale in the same manner as with a debit card. Credit cards offer a different mechanism for obtaining physical cash, known as a cash advance. This process operates distinctly from a typical purchase or a debit card transaction.
Understanding Credit Card Cash Back
When a consumer attempts to receive cash at a point-of-sale using a credit card, the transaction is processed as a cash advance. A cash advance is a withdrawal of cash from your credit card account, meaning you are borrowing money directly from your available credit line. This differs from using a debit card, where you access your own funds held in a bank account. A cash advance functions as a short-term loan provided by your credit card issuer that must be repaid.
The amount borrowed through a cash advance is immediately added to your credit card balance. Unlike a withdrawal from a checking account, a cash advance is not a retrieval of your personal money. Instead, it is a form of credit, allowing you to access liquid funds from your credit card’s borrowing limit.
How a Credit Card Cash Advance Works
You can obtain a cash advance using your credit card in several ways. One common method is to use your credit card at an automated teller machine (ATM). This requires a personal identification number (PIN) associated with your credit card. If you do not have a PIN, many credit card issuers allow you to request one online or by contacting customer service.
Another method is visiting a bank branch affiliated with your credit card’s network. At the bank, present your credit card along with identification to receive cash directly from a teller. Some credit card issuers also provide convenience checks, which are blank checks linked to your credit card account. These checks can be written for a specific amount and then cashed or deposited, with the amount counting as a cash advance against your credit line.
Fees, Interest, and Limits
Cash advances are a costly way to access funds and come with specific financial implications. Most credit card issuers charge an upfront transaction fee for a cash advance. This fee is a percentage of the amount advanced, often ranging from 3% to 5%, or a flat fee such as $5 or $10, whichever is greater. For instance, a $500 cash advance with a 5% fee would incur a $25 charge.
Interest accrual on cash advances begins immediately from the transaction date. Unlike standard credit card purchases, which often have an interest-free grace period, cash advances do not. The annual percentage rate (APR) for cash advances is higher than the APR for regular purchases. Cash advance APRs can be several percentage points higher, sometimes reaching 25-30% or more.
Credit card issuers also impose limits on the amount of cash that can be advanced. The cash advance limit is a separate, lower limit than your overall credit limit for purchases. This limit is a percentage of your total credit line, such as 20% to 50%. For example, a card with a $10,000 credit limit might have a cash advance limit of $2,000.
Distinguishing From Other Cash Back Types
The term “cash back” can be confusing because it refers to different types of financial transactions. When using a debit card, “cash back” at a point-of-sale means retrieving your own money from your linked bank account. This is a direct withdrawal of your existing funds, and merchants may offer this service without additional fees, as it helps them reduce the amount of cash on hand.
Credit card rewards “cash back” is another distinct concept. This refers to a rewards program where cardholders earn a percentage of their spending back on qualifying purchases. For example, a card might offer 1% to 5% cash back on purchases. These earned rewards can be redeemed in various ways, such as a statement credit to reduce your balance, a direct deposit into a bank account, or for gift cards. This type of cash back is a benefit earned from using the card for purchases, not a method for directly accessing physical cash at a register.