How Can I Get Money Off My Credit Card?

Credit cards are primarily for purchases, but they also offer ways to access cash directly. Understanding these methods is important for informed financial decisions.

Accessing Cash Through a Cash Advance

A credit card cash advance functions as a short-term loan extended by your credit card issuer. It allows you to borrow directly against your credit limit, providing immediate access to funds. Unlike using a debit card, which accesses your own bank account funds, a cash advance involves borrowing money that must be repaid.

Obtaining a cash advance can be done in several ways:
Through an ATM, where you insert your credit card, enter your Personal Identification Number (PIN), and select the cash withdrawal option.
By visiting a bank or credit union that accepts your card, presenting your credit card and a valid identification, and requesting a cash advance directly from a teller.
Some card issuers may also offer the option to transfer funds from your credit line directly to your checking account online.
Or over the phone.

Cash advances come with distinct costs that make them an expensive form of borrowing. A transaction fee is typically charged, often calculated as a percentage of the amount withdrawn, such as 3% to 5%, or a flat fee, like $10, whichever is greater. This fee is applied immediately when the cash advance is taken.

Interest also begins accruing immediately on cash advances, unlike regular purchases which often have a grace period before interest charges apply. The Annual Percentage Rate (APR) for cash advances is generally higher than the APR for standard credit card purchases. For example, cash advance APRs can range from 17.99% to 29.99%. This immediate and higher interest rate significantly increases the overall cost of borrowing.

Credit card issuers usually set a separate cash advance limit, which is often lower than your overall credit limit. This means you might not be able to withdraw the full amount of your available credit as a cash advance. It is important to check your credit card statement or contact your issuer to determine your specific cash advance limit.

Using Credit Card Convenience Checks

Credit card convenience checks are pre-printed checks linked to your credit card account. You can write them to pay for goods or services, or to yourself to obtain cash.

When you use a convenience check, the transaction is typically treated as a cash advance by your credit card issuer. This means that convenience checks are subject to the same financial terms as a standard cash advance, including transaction fees.

Interest on convenience checks begins accruing immediately, with no grace period. The interest rate applied is usually the higher cash advance APR. Their financial implications mirror those of direct cash advances.

Financial Implications of Cash Access

Accessing cash from a credit card through methods like cash advances or convenience checks carries substantial financial implications due to their high cost. The combination of an upfront transaction fee and immediate interest accrual at a higher APR makes these options particularly expensive forms of credit. For instance, a cash advance fee can be 3% to 5% of the amount, plus an APR that might be significantly higher than your purchase rate. These costs can accumulate quickly, making it challenging to repay the borrowed amount without incurring significant additional charges.

Taking a cash advance can also impact your credit score. When you obtain a cash advance, it increases your outstanding credit card balance, which in turn raises your credit utilization ratio. This ratio, which measures the amount of credit you are using compared to your total available credit, is a significant factor in credit scoring models. Maintaining a high credit utilization ratio, especially above 30%, can signal increased financial risk to lenders and may negatively affect your credit score.

Regarding repayment, payments made to your credit card balance are generally applied in a specific order. Federal law dictates that any payment amount exceeding the minimum due must first be applied to the balance with the highest interest rate. Since cash advances typically carry the highest interest rates on a credit card, any extra payments you make beyond the minimum will likely go towards paying down the cash advance balance first. This application method aims to help consumers reduce their most expensive debt, but the debt still needs to be paid off to avoid continued interest charges.

Before resorting to accessing cash from a credit card, it is prudent to carefully consider the necessity and your ability to repay the funds promptly. Given the high costs associated with cash advances and convenience checks, exploring less expensive alternatives for financial needs is often advisable. Options such as personal loans, utilizing emergency savings, or adjusting your budget can provide more financially sound solutions than incurring the elevated fees and immediate interest of credit card cash access.