When you need cash because of an emergency or to pay bills, you may wonder if it's possible to withdraw it from your credit card. Many credit card companies do allow you to get funds from your card through a cash advance. While that can be convenient in a pinch, cash advances also have some drawbacks to consider. So before using your credit card to get cash, it's important to weigh the pros and cons.
- Many credit card companies allow you to withdraw money from your card through a cash advance.
- Depending on the card, you may be able to withdraw cash by depositing it in a bank account, using your card at an ATM, or writing a convenience check.
- Cash advances can have higher APRs than purchases or balance transfers, and interest starts accruing on them right away. Plus they often have fees.
How Credit Card Cash Advances Work
Typically, credit cards are meant to be used for making purchases. For instance, you use your card at the checkout in stores or type in your card number and expiration date to buy things online. As you make purchases, your available credit is reduced by that amount until you pay your credit card bill.
Credit card cash advances work differently. If your card allows for them (and not all do), you might have one credit limit for purchases and another limit for cash advances, which is usually lower than your purchase limit. When you take a cash advance, you're borrowing money against this credit limit.
What's more, cash advances begin accruing interest immediately—unlike purchases, where you typically have a grace period of 20 to 30 days to pay off your bill before interest begins to accrue.
There are a number of ways to take a cash advance, including:
- Requesting a cash transfer from your credit card to your bank account
- Withdrawing cash at an ATM
- Writing a convenience check to yourself and cashing it at a bank
You should be able to find your cash advance limit by checking your most recent credit card statement. If you don't see it, you can call your credit card company to ask whether cash advances are an option with your card and, if so, what your limit is.
How Much Does It Cost to Withdraw Cash From a Credit Card?
Cash advances aren't free. There are several costs to be aware of when taking one.
First, there's the cash advance fee. This is a fee the credit card company charges simply for the convenience of withdrawing cash against your cash advance limit. It may be either a flat fee, such as $5 to $10, or a percentage of the advance of amount, whichever is greater. The amount can vary from card to card.
You could also pay additional fees if you're withdrawing cash from a credit card at an ATM or bank branch. An ATM surcharge may apply, or you might have to pay a teller fee for this convenience.
The second part of the cash advance cost equation is the annual percentage rate (APR). In most cases, the cash advance APR is higher than the regular APR for purchases or balance transfers. And, as mentioned above, interest starts accruing immediately.
That's important to keep in mind if you're looking for a low-cost way to access cash. Compared to a short-term personal loan, for example, a cash advance could end up carrying a much higher interest rate.
Unlike purchases, there is no grace period for credit card cash advances. Interest begins accumulating right away.
When Cash Advances Don't Involve Cash
In some instances, transactions can be treated as a cash advance even when you're not withdrawing cash. For example, if you link your credit card to a bank account for overdraft protection any money that's used to cover overdrafts would be considered a cash advance. You may also find that certain transactions, such as using your card to purchase cryptocurrency, are treated as cash advances instead of purchases.
For that reason, it's helpful to read your credit card terms and conditions carefully so you know what is and isn't considered a cash advance.
When you make a payment on your credit card bill, the minimum balance due will be applied to your regular purchase balance first. Any additional payment is applied to the balance with the highest APR next. So if you already have a purchase balance on your card, you may have to pay it in full before any payments are applied to your cash advance.
When Does It Make Sense to Withdraw Cash From a Credit Card?
Withdrawing cash from your credit card may seem like a good option if you're in a tight spot financially. For example, if your car breaks down and you need to pay a tow truck company that doesn't accept credit cards, then it may be your only choice.
But if the situation isn't urgent, you may want to research other options for getting cash since a credit card advance can be expensive. For instance, you might consider:
- Applying for an unsecured personal loan
- Borrowing money from friends or family
- Taking out a home equity loan
- Withdrawing money from an IRA or taking a 401(k) withdrawal or loan
- Liquidating CDs or selling off other assets to raise money
These options all have pros and cons, just like a credit card cash advance. Tapping retirement accounts, for example, can be an easy way to get money, but it could trigger tax penalties. And even if it doesn't, you're still shrinking your retirement nest egg. Home equity loans can offer low-interest rates, but you're putting your home on the line as collateral. Borrowing from friends and family may put money in your hands interest-free, but it could also lead to relationship problems if you can't pay it back as agreed.
Taking out a 401(k) loan essentially means borrowing money from yourself. But bear in mind that if you leave your job for any reason before the loan is repaid, you'll have to pay it back in full almost immediately or it will be treated as a taxable distribution.
The Bottom Line
Credit card cash advances have some advantages, but they can be costly compared with other ways to borrow money. If you need funds but it's not a dire emergency, take some time to research your other options before committing to a credit card cash advance. And if you do end up withdrawing cash from your card, try to pay off the balance as quickly as possible to minimize the interest charges.