How To Withdraw Money: A withdrawal involves removing funds from a bank account, savings plan, pension, or trust. In some cases, conditions must be met to withdraw funds without penalty, and a penalty for early withdrawal usually arises when a clause in an investment contract is broken.
You can visit your local bank branch and ask a teller to let you withdraw some money from your savings account. Once the money is in your wallet, you’re free to go to any store you’d like to spend it. Many banks also make it easy to make withdrawals from your savings account using an ATM card. Withdrawing cash using a credit card is as simple as withdrawing cash using a debit card from an ATM. You just need to walk into any of your closest ATM kiosks with your credit card and follow the instructions for cash withdrawal to get the money.
When you withdraw money from your credit card account, what you’re really doing is taking out a short-term cash loan against your credit card’s credit limit. This loan is on a revolving basis, which means you’re being charged interest on the outstanding amount from the second you withdrew the money at the ATM.
Can You Withdraw Money From a Credit Card?
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.
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
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.
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 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.
What Is a Credit Card?
A credit card is a thin rectangular piece of plastic or metal issued by a bank or financial services company, that allows cardholders to borrow funds with which to pay for goods and services with merchants that accept cards for payment. Credit cards impose the condition that cardholders pay back the borrowed money, plus any applicable interest, as well as any additional agreed-upon charges, either in full by the billing date or over time. An example of a credit card is the Chase Sapphire Reserve. (You can read our Chase Sapphire Reserve credit card review to get a good sense of all the various attributes of a credit card).
In addition to the standard credit line, the credit card issuer may also grant a separate cash line of credit (LOC) to cardholders, enabling them to borrow money in the form of cash advances that can be accessed through bank tellers, ATMs, or credit card convenience checks. Such cash advances typically have different terms, such as no grace period and higher interest rates, compared to those transactions that access the main credit line.
Issuers customarily pre-set borrowing limits, based on an individual’s credit rating. A vast majority of businesses let the customer make purchases with credit cards. Which remains one of today’s most popular payment methodologies for buying consumer goods and services.
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.
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