How to Use a Credit Card at an ATM

Using a credit card at an ATM allows you to access cash, but it operates differently from using a debit card, where you are withdrawing your own funds. This transaction is specifically known as a “cash advance,” and it functions as borrowing money directly from your credit card’s available credit line. While it provides immediate liquidity, understanding the mechanics of a cash advance is important before proceeding.

Understanding Credit Card Cash Advances

A cash advance is essentially a short-term loan taken against your credit card’s credit limit. One immediate cost is the cash advance fee, which is typically charged right at the time of the transaction. This fee is often a percentage of the amount withdrawn, commonly ranging from 3% to 5%, or a flat minimum fee, such as $10, whichever is greater.

Beyond the upfront fee, cash advances usually carry a higher Annual Percentage Rate (APR) compared to the APR on regular purchases. Interest on a cash advance also begins accruing immediately from the transaction date. Unlike typical purchases that may offer a grace period before interest charges apply, there is no such grace period for cash advances. This immediate interest accrual makes cash advances a more expensive way to borrow money.

Preparing for Your ATM Cash Advance

Before seeking a cash advance at an ATM, take several preparatory steps. First, identify your credit card’s cash advance limit, which is typically a portion of your overall credit limit and can be found on your monthly statement or by logging into your online account. This limit dictates the maximum amount of cash you can withdraw.

Confirming or obtaining a Personal Identification Number (PIN) for your credit card is another necessary step, as it is required for ATM cash advances. While a credit card PIN functions similarly to a debit card PIN, it may need to be specifically requested or set up with your card issuer. You should also review your cardholder agreement for the specific cash advance fees and interest rates that apply to your account. Finally, ensure the ATM you plan to use accepts your credit card’s network, such as Visa or Mastercard.

Steps to Take at the ATM

The process of obtaining a cash advance at an ATM is straightforward. Begin by inserting your credit card into the ATM’s card slot. Next, you will be prompted to enter your credit card’s Personal Identification Number (PIN).

After entering your PIN, navigate the ATM menu to select the “cash advance” or “withdrawal from credit” option, which distinguishes it from a standard debit card withdrawal. You will then need to input the specific cash amount you wish to withdraw, ensuring it remains within your available cash advance limit. Before the transaction finalizes, the ATM may display a summary of the withdrawal, including any fees charged by the ATM operator; review this information carefully and confirm the transaction. Conclude the process by collecting your dispensed cash and the transaction receipt.

Managing Your Cash Advance Repayment

After obtaining a cash advance, prompt repayment is important to minimize the overall cost due to the immediate accrual of interest and often higher Annual Percentage Rates (APRs). Unlike regular purchases, interest on cash advances begins from the transaction date, making every day the balance remains unpaid more expensive. Therefore, paying off the cash advance as quickly as possible helps reduce the total interest accumulated.

Credit card payments are typically allocated according to specific rules, often prioritizing balances with the highest interest rates once the minimum payment is met. Since cash advances usually carry the highest APR on a credit card, any payment exceeding the minimum due is generally applied to the cash advance balance first, which assists in its faster reduction.

A cash advance also increases your credit utilization ratio. A higher utilization ratio can negatively affect your credit score, so swift repayment helps lower this ratio. Regularly monitoring your credit card statement will provide clear details on the cash advance, including fees and accrued interest.