Can You Pull Out Money With a Credit Card?

It is possible to obtain cash using a credit card through a process known as a cash advance, which allows you to borrow against your credit card’s line of credit. While cash advances can provide immediate funds, they come with significant costs and potential negative consequences for your financial health. Understanding these implications is important before considering this option.

Understanding Credit Card Cash Advances

A credit card cash advance is a short-term loan drawn directly from your available credit limit, providing physical cash rather than a purchase. The terms and costs for cash advances differ significantly from those of regular purchases. Credit card issuers often set a separate, lower limit for cash advances than for your overall purchasing credit limit.

Common methods for obtaining a cash advance include using an ATM with your credit card and PIN. You may encounter daily ATM withdrawal limits and additional fees from the ATM operator. Another option is visiting a bank teller, where you can present your credit card and identification to request the advance.

Some credit card companies also provide convenience checks, linked directly to your credit card’s cash advance limit. You can write these checks to access funds or make payments, which are then charged as a cash advance. Various other transactions, such as transferring money via certain payment apps, paying down other debts, or exchanging currency, might also be classified as cash advances by your issuer.

The Financial Costs of Cash Advances

Cash advances incur distinct financial charges, making them a particularly expensive form of borrowing. An immediate cost is the cash advance fee, applied upfront when you take the advance. This fee is commonly a percentage of the amount borrowed, often ranging from 3% to 5%, or a flat minimum fee, such as $5 or $10, whichever is greater. For instance, a $500 cash advance with a 5% fee would cost an additional $25.

Beyond this initial fee, cash advances carry a significantly higher Annual Percentage Rate (APR) compared to regular credit card purchases. While purchase APRs vary, cash advance APRs are often substantially elevated, frequently falling in the range of 17.99% to 29.99%, or even higher. This higher interest rate means the cost of borrowing increases more rapidly.

A distinguishing feature of cash advances is the absence of a grace period for interest accrual. Unlike many credit card purchases, interest on cash advances begins to accrue immediately from the transaction date. This immediate interest, combined with the upfront fee and higher APR, means the total cost can escalate quickly, even if repaid in a short timeframe.

Implications for Your Credit and Debt

Taking a credit card cash advance can have notable consequences for your credit health and overall debt burden. Obtaining a cash advance immediately increases your outstanding credit card balance. This directly impacts your credit utilization ratio, which is the amount of credit you are currently using compared to your total available credit. A higher credit utilization ratio, especially if it exceeds 30% of your available credit, can negatively affect your credit score.

The combination of high fees, elevated interest rates, and the absence of a grace period makes cash advances a very expensive form of debt. Interest begins accruing on the full amount borrowed from day one, leading to a rapid accumulation of the total balance due. This accelerated growth of debt can make it considerably more challenging to repay the advance, potentially leading to a cycle of increasing debt.

Frequent reliance on cash advances can also shape how lenders perceive your financial responsibility. Lenders may interpret regular cash advance activity as a sign of financial distress or poor money management. This perception could potentially impact your ability to secure new loans or credit lines in the future, or result in less favorable terms on subsequent credit products. Difficulty in repaying the advance, which might lead to missed payments, further damages your credit history, as payment history is a significant factor in credit scoring.

Alternatives for Accessing Funds

When faced with an immediate need for funds, several alternatives to a credit card cash advance can be more financially sound.

Personal Loans

Personal loans, offered by banks and credit unions, typically feature lower interest rates and fixed repayment schedules. The average interest rate for a 24-month personal loan can be around 12.57%, significantly lower than typical cash advance APRs.

Savings and Home Equity

Accessing funds from your personal savings or an established emergency fund is often the most financially prudent choice, as it incurs no interest or fees. For homeowners, a home equity line of credit (HELOC) or a home equity loan might offer lower borrowing costs by leveraging the equity in your home. HELOC rates can range from approximately 7.75% to over 11% APR.

Credit Union Loans and Pay Advances

Credit unions often provide small-dollar loans, sometimes referred to as Payday Alternative Loans (PALs), designed as more affordable short-term options than traditional payday loans. These loans typically have a maximum interest rate of 28% and a maximum application fee of $20. Some employers may also offer a pay advance, allowing you to access a portion of your earned wages before your regular payday, usually without incurring interest or fees. Proactive financial planning and maintaining a budget can also help mitigate the need for urgent funds, reducing reliance on high-cost borrowing methods.