Can You Get Cash From an ATM With a Credit Card?
Learn if you can get cash from an ATM with a credit card and understand the complete financial implications involved.
Credit cards offer a convenient way to manage expenses, providing a line of credit for various purchases. While it is possible to withdraw cash from an automated teller machine (ATM) using a credit card, the process and implications differ significantly from standard debit card withdrawals or typical credit card purchases.
Understanding Cash Advances
A cash advance is a transaction where you borrow cash directly against your credit card’s available credit limit. Unlike a debit card, which accesses your own bank funds, a credit card cash advance is a short-term loan from your card issuer. Purchases often come with a grace period, allowing you to pay off the balance before interest accrues, but cash advances do not.
Card issuers set a specific cash advance limit, often a percentage of your overall credit limit. This limit is generally lower than your total credit line. You can find your specific cash advance limit on your monthly credit card statement or by contacting your card issuer directly.
The Process of Obtaining a Cash Advance
Obtaining a cash advance from an ATM using a credit card requires a Personal Identification Number (PIN). This PIN is distinct from any debit card PIN and is specifically linked to your credit card for cash advance purposes. If you do not have a PIN, contact your card issuer to request or set one up.
Once you have your credit card and PIN, the ATM process is similar to a debit card withdrawal. Insert your credit card, enter your PIN, and select the cash withdrawal or cash advance option. Follow the prompts for the amount you wish to withdraw. ATMs may have daily withdrawal limits, which could restrict the amount of cash you can obtain.
Associated Costs and Interest
Cash advances come with distinct costs, making them an expensive way to borrow money. A primary cost is the cash advance fee, which is typically charged as soon as the transaction occurs. This fee is commonly a percentage of the amount withdrawn (often 3% to 5%) or a flat fee (e.g., $10 or $15), whichever is greater. For example, a $500 cash advance with a 5% fee would incur a $25 charge upfront.
In addition to this fee, cash advances carry a higher Annual Percentage Rate (APR) than standard purchases. Unlike purchases, interest on a cash advance begins accruing immediately from the transaction date, without any grace period. Even if you pay off the cash advance quickly, you will incur interest charges for the period borrowed, alongside the initial fee. These combined costs significantly increase the total amount repaid, making cash advances a costly option.
Effects on Your Credit and Financial Health
Cash advances can impact your credit score and financial health. A cash advance contributes to your credit utilization ratio, which is the amount of credit used compared to your total available credit. A higher utilization ratio, especially exceeding 30% of your available credit, can negatively affect your credit score, as credit utilization is a significant factor in credit scoring models. This impact is more pronounced if the cash advance pushes your overall credit usage higher.
The high costs of cash advances, including fees and immediate interest, can make the debt challenging to manage. If not repaid quickly, accumulating interest can lead to a growing balance. This can trap individuals in a cycle of debt, where minimum payments primarily cover interest and fees rather than reducing the principal. Federal law permits card issuers to apply payments exceeding the minimum amount to the balance with the highest interest rate first, typically the cash advance balance, helping to mitigate prolonged accrual if more than the minimum is paid.