Can You Use a Credit Card on an ATM?

It is possible to use a credit card at an ATM to obtain cash, a transaction commonly referred to as a “cash advance.” This process allows you to borrow cash directly from your credit card’s available credit limit. While it offers immediate access to funds, it differs significantly from a standard credit card transaction and comes with distinct financial implications.

Using a Credit Card for Cash

Obtaining a cash advance from an ATM using a credit card involves a straightforward process. You insert your credit card into the ATM. The ATM will then prompt you to enter your Personal Identification Number (PIN). If you do not have a PIN, you will need to request one from your card issuer, a process that can often be initiated online.

After entering your PIN, you will select the “cash withdrawal” or “cash advance” option from the ATM menu. You then enter the desired cash amount, keeping in mind that credit card issuers typically impose daily limits on cash advance transactions. The ATM may also display a warning about associated fees, requiring your acceptance to proceed with the transaction.

Costs Associated with Credit Card Cash Advances

Cash advances incur several distinct costs that make them a more expensive way to access funds compared to typical credit card purchases. A primary charge is the cash advance fee, which is typically either a percentage of the amount withdrawn (often ranging from 3% to 5%) or a flat minimum fee (such as $10). This fee is applied immediately when the cash advance is taken out.

Another significant cost is the interest rate, known as the cash advance Annual Percentage Rate (APR). This APR is generally higher than the APR applied to standard purchases, often ranging from 25% to 30%, while typical purchase APRs might be around 20%. Unlike purchases, which often benefit from a grace period where interest is not charged if the balance is paid in full by the due date, interest on cash advances begins to accrue immediately from the transaction date. Additionally, you might encounter separate fees charged by the ATM operator.

Impact on Your Finances

Taking a cash advance can have broader implications for your financial health beyond the immediate fees and interest. The amount of the cash advance, along with its associated fees, is added to your credit card balance, which can significantly increase your credit utilization ratio. This ratio is a major factor in calculating your credit score. A higher utilization ratio, especially above 30% of your available credit, can negatively affect your credit score.

The immediate accrual of interest at a higher APR means that the borrowed amount can grow rapidly if not paid off quickly. This can make it challenging to reduce your debt, potentially leading to a cycle where more of your payments go towards interest rather than the principal. Frequent reliance on cash advances may also be viewed by lenders as a sign of financial distress. This perception could impact your ability to qualify for other credit products, such as loans or new credit cards, in the future.

Alternatives to Cash Advances

When faced with an immediate need for cash, several alternatives can be more financially prudent than a credit card cash advance. A common option is to withdraw cash using a debit card at an ATM, as this draws directly from your bank account and typically avoids cash advance fees and interest. Many retailers also offer cashback at the point of sale during a debit card purchase, often without any additional fees.

Building and maintaining an emergency savings fund is a strong defense against unexpected cash needs. Financial experts often recommend saving enough to cover three to six months of essential living expenses. For larger, planned financial needs, a personal loan from a bank or credit union can be a more affordable choice, as these typically feature lower interest rates and structured repayment terms compared to cash advances. Borrowing from friends or family can also be an option for short-term needs, potentially without interest or fees, though it is advisable to establish clear repayment terms to maintain the relationship.