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Table of Contents

How Cash Advances Function

How Much Does It Cost?

If it doesn’t involve cash

When does it make sense?

The Bottom Line

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Can You Withdraw Money From a Credit Card?

Credit card cash advances offer instant access to cash, but at a cost

By Rebecca Lake

Updated June 06, 2021

Reviewed by Thomas J. Catalano

When you need cash because of an emergency or to pay for bills, you might think about whether it’s possible to cash it out of the credit card you have. Many credit card companies do allow you to get cash from your card via the process of a cash advance. While it can be useful when you need it but cash advances do come with a few drawbacks that you should consider. So before making use of your credit card to get cash, it’s important to weigh the advantages and disadvantages.

Key Takeaways

A lot of credit card companies permit you to withdraw money from your card through the cash advance.

Based on the card, you may be able to withdraw cash through depositing the money into a bank account, using your ATM card or by writing a convenience check.

Cash advances can be more expensive than purchases or balance transfers, and interest starts accruing on them immediately. Plus they often have fees.

How Credit Card Cash Advances work

Typically, credit cards are meant to be used for making purchases. For example, you can use your credit card at checkout in stores or type in the card’s number and expiration date when you purchase things on the internet. When you purchase something your credit limit is reduced by the amount until you pay your credit card charge.

Credit card cash advances are different. If your card allows for them (and they’re not always available) it could be that you have a limit on credit for purchases, and a different amount for cash advances which is usually lower than the limit for purchases. If you make an advance in cash you are borrowing against this credit limit.

Additionally, cash advances begin accruing interest immediately–unlike purchases, which typically allow a grace period of 20 to 30 days in which to pay off your bill prior to interest accruing.

There are several methods to get an advance in cash, such as:

Requesting a cash transfer from your credit card to your bank account

Withdrawing cash at an ATM

Making a convenience check for yourself, and then cashing it at an ATM or a bank

It is possible to find the cash advance limit you have by looking at the most recent statement from your credit card. If you don’t see it, contact the credit card company you have used to inquire whether cash advances are available for you and, in the event that they are, what your limit is.

What is the cost to Withdraw Cash From the credit Card?

Cash advances aren’t free. There are a variety of costs to be aware of before taking one.

There’s first the cash advance fee. It’s a charge that the credit card company charges for the convenience of withdrawing money against your cash advance limit. It could be one-time fee, for example, $5 to $10 or a percentage of the advance of amount, whichever is greater. The amount may differ between cards.

You may also have to pay additional charges if you withdraw funds from credit card an ATM or branch of a bank. A ATM surcharge might be applicable or you may be required to pay a teller fee to use this service.

The second component of the cash advance cost equation includes the annual percentage rates (APR). Most of the time the cash advance rate is higher than the standard APR for balance transfers or purchases. And, as mentioned above the interest begins accruing as soon as it is received.

That’s important to keep in mind when you’re searching for a cost-effective method to get cash. Compared to a short-term personal loan like a cash advance an advance in cash, it could end up carrying a much more expensive interest rate.

As with purchases, there’s no grace time for cash advances. Interest begins accumulating right away.

Cash Advances that don’t require Cash

In some instances transactions, they can be regarded as cash advances even when you’re not withdrawing cash. For instance, if you connect your credit card with an account at a bank for overdraft protection any money that’s used to cover overdrafts could be considered to be a cash advance. You may also find some transactions such as the use of your credit card to purchase cryptocurrency, are regarded as cash advances and not as purchases.

This is why it’s important to study the terms and conditions carefully so you are aware of what is and isn’t considered a cash advance.

If you make a payment through your credit card bill the minimum amount due will be applied to your purchase balance first. Any additional payment is applied to the balance that has the highest rate of interest next. If you already have a purchase balance on your credit card, you may have to pay the balance in the full amount before having any payments added to the cash advance.1

When Does It Make Sense to Withdraw Cash From your credit card?

Cash withdrawals from your credit card could seem like a great alternative when you’re in a bind financially. For instance, if your car breaks down and you need to pay for a tow truck company that doesn’t accept credit cards, then this might be the only option.

However, if the need isn’t urgent, you may want to research other options for getting cash since the cost of a credit card loan could be costly. For instance, you might consider:

Inquiring for a personal loan

Borrowing money from friends or family

Incorporating the home equity loan

When you withdraw money from an IRA or taking the opportunity to take a 401(k) withdrawal or loan

Liquidating CDs or selling other assets to raise funds

These options all have pros and cons, much as a cash advance. The tapping of retirement accounts, for example, can be an easy method to access cash however it can also trigger tax penalties. Even if it doesn’t mean you’re losing your retirement savings. Home equity loans can offer low-interest rates, but you’re putting your home at risk as collateral. Lending money to family members and friends can bring money into your pocket without interest, but it can cause problems with your relationship if you can’t pay it back as agreed.

Note

The process of taking out a 401(k) loan essentially means borrowing money from yourself. Be aware that if you quit your job for reasons other than the loan is repaid, you’ll have to repay it in full and fast or it will be treated as a taxable distribution.

The Bottom Line

Cash advances from credit cards have some advantages, but they can be costly as compared to other options to borrow money. If you require funds, but it’s not an situation, you should take the time to investigate other options prior to committing to a credit card cash advance. And if you do decide to withdraw cash from your credit card, try to pay off the balance as fast as you can to reduce costs of interest.