Do ATMs Take Credit Cards for Cash Advances?

ATMs are commonly used for cash withdrawals with debit cards. Many wonder if credit cards can serve a similar purpose. While credit cards can be used at ATMs, the transaction differs significantly from a typical debit card withdrawal. A debit card accesses funds directly from your bank account, representing your own money. In contrast, using a credit card at an ATM involves borrowing money from your credit card issuer, which carries specific financial implications.

Credit Card Cash Advances

A credit card cash advance allows you to borrow cash directly from your credit limit. This transaction involves obtaining physical currency, distinct from a purchase. ATMs are a common venue for cash advances. To complete a cash advance, insert your credit card into the ATM and enter a Personal Identification Number (PIN) associated with your credit card. This PIN is often different from a debit card PIN and may need to be requested from your card issuer.

Once your PIN is entered, you select the option for a cash withdrawal or cash advance and specify the desired amount. The amount you can withdraw is subject to limits set by your credit card issuer, which are usually a percentage of your overall credit limit and often lower than your total credit line. For instance, a credit card with a $7,000 credit limit might have a cash advance limit of only $400 to $500. Daily limits can also apply, sometimes capping withdrawals at a few hundred dollars. This cash advance amount is then added to your credit card balance, similar to a purchase.

Costs of Cash Advances

Cash advances come with specific financial costs that make them an expensive way to obtain funds. A transaction fee is almost always charged, calculated as a flat fee or a percentage of the amount withdrawn, whichever is greater. Fees range from 3% to 5% of the advance amount, or a minimum of $5 to $10. This fee applies immediately.

In addition to the upfront fee, cash advances generally carry a higher Annual Percentage Rate (APR) than standard credit card purchases. This cash advance APR can be 25% to 30% or higher. Interest on cash advances typically begins accruing immediately from the transaction date, as there is no grace period. This means interest starts accumulating right away, unlike purchases which often have a grace period before interest is charged.

Taking a cash advance also impacts your credit utilization ratio, which is the amount of revolving credit you are using compared to your total available credit. A high utilization ratio can negatively affect your credit score, as it may suggest increased financial risk to lenders. If you struggle to repay the advance promptly, the combination of high fees, immediate interest, and increased credit utilization can make it difficult to manage the debt and impact your credit standing.

Other Ways to Get Cash

Several alternatives can be more financially prudent for obtaining cash than a credit card cash advance. One common method is using a debit card at an ATM, which directly accesses funds from your checking account. This uses your own money and typically avoids the fees and immediate interest charges associated with credit card cash advances.

Another option is obtaining cash back at a point-of-sale terminal when making a purchase with a debit card. Many retailers offer this service, allowing you to add a small amount to your purchase and receive cash from the cashier. While some merchants might charge a small fee, it is generally much lower than a cash advance fee.

For larger cash needs, a personal loan from a bank or credit union can be a viable alternative. These loans typically offer lower interest rates compared to credit card cash advances and come with structured repayment terms. Borrowing from trusted friends or family can be an informal option for short-term cash needs, often with more flexible terms and without formal fees or interest. However, it is important to establish clear repayment expectations to maintain the relationship.