Can I Withdraw Money From a Credit Card?

It is possible to withdraw money from a credit card through a process known as a cash advance. While offering immediate access to funds, cash advances are a more expensive way to borrow money due to unique terms and costs.

Understanding Cash Advances

A cash advance represents a direct loan of cash from your credit card’s available credit limit. Interest begins accruing immediately, unlike most credit card purchases that offer a grace period. Transactions commonly classified as cash advances include withdrawing money at an ATM using your credit card and a Personal Identification Number (PIN), or obtaining cash directly from a bank teller. Additionally, using convenience checks provided by your credit card company, or certain bill payments and peer-to-peer transfers, may also be treated as cash advances.

How to Obtain a Cash Advance

One common method is to use an Automated Teller Machine (ATM) by inserting your credit card and entering the required PIN. Ensure your PIN is available; many card issuers allow online requests if you don’t know it.

Another way to get a cash advance is by visiting a bank branch in person. You can present your credit card and a valid form of identification to a bank teller, who will then process the transaction for you. Convenience checks, provided by some credit card issuers, function like personal checks and draw funds from your cash advance limit. These can be cashed or deposited into your bank account. In some cases, cardholders might even be able to request a cash advance over the phone, with the funds transferred to a chosen account.

Financial Implications of Cash Advances

A cash advance fee is typically charged immediately, often ranging from 3% to 5% of the amount withdrawn, or a flat minimum fee, whichever is greater. For example, a $1,000 cash advance with a 5% fee would incur a $50 charge instantly. Cash advances also carry a higher Annual Percentage Rate (APR) compared to regular purchases, often 25% to 30% or more.

While a cash advance does not directly harm a credit score, it can negatively affect it indirectly. Taking a cash advance increases your outstanding balance, which in turn raises your credit utilization ratio—the amount of credit you are using compared to your total available credit. A utilization ratio above 30% can signal financial distress to credit bureaus and may cause a dip in your credit score. The combination of fees, higher interest rates, and immediate interest accrual can make it challenging to pay off the balance quickly, potentially keeping utilization high and impacting your credit score.

Alternative Cash Options

When immediate cash is needed, several alternatives exist that may be more financially advantageous than a credit card cash advance. One option involves drawing from personal savings or an established emergency fund, which avoids any fees or interest charges. Another consideration is a personal loan from a bank or credit union, which typically offers lower interest rates than cash advances, often ranging from approximately 6% to 36% APR depending on creditworthiness.

Borrowing from friends or family can be a viable choice, as it often comes without interest or fees, but it is advisable to establish clear repayment terms to avoid misunderstandings. Some employers offer payroll advances, allowing employees to access a portion of their earned wages before their scheduled payday, usually without interest or fees. Utilizing a debit card to withdraw funds directly from a checking account is also an option, as it accesses your own money without incurring borrowing costs.