Can You Pull Money Out of an ATM With a Credit Card?

Credit cards are primarily for purchases, but also allow cash access from your credit line via ATMs. This function, a cash advance, offers immediate liquidity but has financial considerations different from standard purchases. Understanding these aspects is important.

Understanding Credit Card Cash Advances

A cash advance is a short-term loan drawn against your existing credit line, distinct from a regular credit card purchase. You are borrowing money from your credit card issuer, which becomes part of your outstanding balance. The amount you can withdraw is capped at a percentage of your total credit limit, varying by card and issuer. For instance, a card with a $15,000 limit might cap cash advances at $4,500.

To obtain a cash advance from an ATM, you need your physical credit card and a personal identification number (PIN) from your card issuer. The process involves inserting your card, entering your PIN, selecting “cash withdrawal” or “cash advance,” and choosing the desired amount. ATMs often have their own daily withdrawal limits, which can be lower than your credit card’s overall cash advance limit, typically ranging from $300 to $1,000 per day.

Financial Implications of Cash Advances

Cash advances are an expensive way to obtain funds due to direct monetary costs. A transaction fee is almost always charged, typically 3% to 5% of the advanced amount, or a flat fee like $10, whichever is greater. This fee applies immediately. You may also face an extra fee from the ATM operator if it is not part of your card issuer’s network.

A key financial implication is the immediate accrual of interest. Unlike standard credit card purchases, which often have a grace period, cash advances typically start accumulating interest from the transaction date, meaning there is no interest-free period. The annual percentage rate (APR) for cash advances is usually higher than for purchases, often 20% to 30% or more. For example, withdrawing $500 with a 5% fee and a 29.2% APR means a $25 upfront fee, and interest starts daily on the $500. This higher interest rate and lack of grace period can lead to a higher repayment amount if not paid quickly.

Credit Score Impact of Cash Advances

Taking a cash advance can influence your credit score, primarily through its effect on credit utilization. Credit utilization is the percentage of your available credit used, and it is a significant factor in credit scoring models. A cash advance increases your outstanding balance, which raises your credit utilization ratio. Lenders prefer to see credit utilization below 30% of your total available credit; exceeding this can negatively impact your score.

While a cash advance transaction does not appear as a unique item on your credit report, the increased balance is reported. This higher balance can signal to lenders that you are relying more heavily on credit, potentially indicating higher risk. Maintaining high balances from cash advances can lead to an elevated utilization ratio, which might lower your score over time. Prompt repayment is important to mitigate negative effects, as consistent, on-time payments contribute positively to your credit history.

Alternative Methods for Obtaining Cash

For those needing cash, several alternatives are less costly and have fewer negative impacts than a credit card cash advance. One method is using a debit card to withdraw funds directly from a checking account at an ATM. This accesses your own money, avoiding interest charges or credit utilization concerns. While ATM fees might apply for out-of-network machines, these are typically much lower than cash advance fees.

Another option is a personal loan, which generally offers lower interest rates than cash advances. Personal loans typically have fixed repayment terms, providing a clear path to debt repayment. Employees can also explore payroll advances from their employer, which are short-term loans repaid through future payroll deductions. These advances are often interest-free or carry minimal administrative fees. Other alternatives include borrowing from friends or family, or exploring “buy now, pay later” (BNPL) services for specific purchases, which can offer installment plans with low or no interest.