Can I Transfer Cash From a Credit Card to a Bank Account?

It is possible to transfer cash from a credit card to a bank account, but this transaction is typically structured as a cash advance rather than a simple transfer of your own funds. This method of accessing money from your credit card comes with distinct financial implications and costs that differ significantly from regular credit card purchases. Understanding these aspects is important before proceeding.

Understanding Cash Advances

A cash advance from a credit card is essentially a short-term loan you take against your available credit line. It functions more like a loan than a payment tool, as you are directly borrowing money rather than purchasing goods or services. Credit card issuers typically set specific limits for cash advances, which are often a percentage of your overall credit limit and are usually lower than your credit limit for purchases. For example, a card with a $7,000 credit limit might have a cash advance limit of $400 to $500, or perhaps 30% to 50% of the total credit limit. Before considering a cash advance, it is important to consult your cardholder agreement. This document outlines the specific cash advance limits, any applicable fees, and the interest rates that will apply to these transactions. You can also typically find this information by contacting your credit card issuer directly or by checking your online banking portal or monthly statements.

How to Get a Cash Advance

You can obtain a cash advance from your credit card through several methods:

Automated Teller Machine (ATM): Insert your credit card into the ATM and select the “cash advance” or “withdrawal” option, ensuring you choose “credit” rather than “debit.” You will need your Personal Identification Number (PIN) to complete the transaction. If you do not have a PIN or have forgotten it, you can typically request one from your credit card issuer online or by calling their customer service.
Bank or Credit Union Teller: Present your credit card and a valid form of identification, such as a driver’s license, to the teller. Inform the teller you wish to perform a cash advance and state the desired amount.
Convenience Checks: Some credit card issuers provide convenience checks, which function like personal checks but draw funds from your credit card’s available credit line. You can write these checks to yourself, deposit them into your bank account, or cash them at a financial institution.
Direct Transfers: In some cases, card issuers allow direct transfers from your credit card line to a linked bank account through their online portals or via phone requests. This process typically involves logging into your credit card account online and initiating a transfer to your checking or savings account. The funds are then deposited, usually within a few business days.

Costs and Financial Impact

Cash advances involve several costs, making them an expensive way to borrow money. A cash advance fee is typically charged upfront, commonly a percentage of the amount advanced (often ranging from 3% to 5%) or a flat fee (such as $10), whichever is greater. For example, a $1,000 cash advance with a 5% fee would incur a $50 charge immediately.

Cash advances also carry a higher Annual Percentage Rate (APR) than standard credit card purchases. While purchase APRs can vary, cash advance APRs are often several percentage points higher and can be in the range of 25% or more. Interest on a cash advance begins accruing immediately from the transaction date, meaning there is no grace period to avoid interest charges, unlike with regular purchases. This immediate interest accrual means the total cost of borrowing can quickly increase, especially if the balance is not repaid promptly.

Taking a cash advance can also affect your credit score, primarily due to its impact on your credit utilization ratio. This ratio measures the amount of credit you are using compared to your total available credit. When you take a cash advance, it increases your outstanding balance, which in turn raises your credit utilization. A high credit utilization ratio, generally considered above 30%, can negatively impact your credit score because it may signal to lenders that you are a higher credit risk. While a cash advance itself is not reported differently on your credit report than other credit card usage, the increased debt load can still have an indirect negative effect.

When repaying a credit card balance that includes a cash advance, payments are applied according to specific rules. Under the Credit CARD Act of 2009, any payment amount exceeding the minimum payment must be applied to the balance with the highest interest rate first. Since cash advances typically have the highest interest rates, any amount paid above the minimum will generally go towards paying off the cash advance balance first. This payment allocation helps reduce the most expensive debt more quickly, underscoring the importance of making payments above the minimum to accelerate repayment.