Can You Use a Credit Card at an ATM?

Automated Teller Machines (ATMs) serve as convenient terminals for accessing financial services. While primarily associated with debit card withdrawals from bank accounts, ATMs can also dispense cash using a credit card. This specific transaction, however, differs significantly from a typical debit card withdrawal and is known as a cash advance. Understanding the nature and implications of a credit card cash advance is important before proceeding with such a transaction.

Understanding Credit Card Cash Advances

A credit card cash advance functions as a short-term loan extended by your credit card issuer, where you borrow directly from your available credit limit. This differs from a purchase, as you obtain liquid funds rather than a good or service, and it adds to your credit card debt rather than drawing from a bank account.

Cash advances typically carry a higher Annual Percentage Rate (APR) compared to the APR applied to standard purchases. There is usually no grace period, meaning interest begins to accrue immediately from the transaction date until the balance is fully repaid. Credit cards also often have a separate cash advance limit, which is generally a smaller portion of your overall credit limit.

The Costs of a Cash Advance

Cash advances involve several distinct costs. The credit card issuer typically charges a cash advance fee, which is either a flat amount or a percentage of the withdrawn sum. This fee commonly ranges from 3% to 6% of the transaction amount, or a minimum of $5 to $10, whichever is greater.

Additionally, the ATM operator may impose a separate charge for using their machine. The APR for cash advances is often higher than the purchase APR, sometimes ranging from 20% to 30% or more. For example, a $1,000 cash advance with a 5% fee and a 25% APR, if repaid in one month, could cost approximately $50 in fees and interest. These fees, combined with the immediate interest accrual, make cash advances a significantly more expensive option than other forms of borrowing.

Steps to Obtain an ATM Cash Advance

To obtain a cash advance at an ATM, you need your credit card and its Personal Identification Number (PIN). If you do not have a PIN, request one from your credit card issuer, which can often be done online or by phone.

Locate an ATM displaying your credit card network’s logo. Insert your card and enter your PIN. Select the “cash advance” or “cash withdrawal” option from the menu. After entering the desired amount, confirm the transaction and acknowledge any associated fees.

Key Considerations Before Taking a Cash Advance

Before taking a cash advance, consider its financial implications. While it doesn’t directly impact your credit score, a cash advance can significantly increase your credit utilization ratio (the amount of credit used compared to total available credit). A high utilization ratio, generally above 30%, can negatively affect your credit score and be viewed unfavorably by lenders.

Cash advances are an expensive form of borrowing, best reserved for emergencies when no other options are available. More cost-effective alternatives include using a debit card for withdrawals, seeking a personal loan with potentially lower interest rates, or borrowing from friends or family. If a cash advance is taken, pay it off as quickly as possible to minimize interest charges. Payments exceeding the minimum due are often applied to balances with the highest interest rate first, which is typically the cash advance.