You may be asking yourself “Can I get cash out of the Automated Teller Machine with my credit card?”
Yes! Most credit cards will let you withdraw cash at an ATM. Great news, right?
Borrowing cash on your credit card is a cash advance. Cash advances usually come with very high fees. Even worse, cash advances can signal to lenders that you are being irresponsible with money, according to www.creditcardinsider.com.
Reasons why cash advances are a bad idea
- Fee on the cash advance: You will usually have to pay a fee based on the amount of the cash you borrow.
- No grace period: When you make a purchase on most credit cards, the bank won’t start charging interest right away. Cash advances are different. When you borrow cash from your banks, they start charging you interest immediately, so the finance charges add up quickly.
- High APR: The APR on cash advances is usually much higher than normal purchases. Remember, there is no grace period. So you will start getting charged interest at this absurdly high rate immediately.
- Bad sign for lenders: If your bank sees you are using cash advances, you might get flagged as a risky borrower by their risk models. That is because they know people use cash advances when they are desperate. If they see you as risky, you might not be able to get higher lines of credit or good terms with that bank in the future. They might even decide to raise the interest rate on your card going forward, or close your account.
- Reduced credit utilisation: Cash advances add to your credit card debt. This debt shows up on your credit reports. Generally, the higher your credit card debt is compared to your total available credit, the lower your credit scores will be. If you already have high balances on your credit cards compared to your credit limits, then cash advances can have a big negative impact on your credit scores.
Will my credit card work in an ATM?
Check the cardholder agreement that came with your card. If you see a cash advance APR and cash advances Fee, then you can probably get a cash advance with that card. It might look something like this:
Check your statement. If you see a cash advance credit line or cash advance credit limit, that is the maximum amount of cash you can take out. It is important to know what this is so you don’t try to withdraw too much. The credit limit for cash advances is usually smaller than your credit limit for regular purchases.
If you don’t have your credit card terms or a statement handy, you can call the phone number on the back of your card to ask if your account allows cash advances and the limit of your cash advance line of credit.
How do I get money from an ATM with a credit card?
You’ are really still thinking of taking out a cash advance? Here is how you can do it, but your future self will probably thank you if you don’t.
Check to make sure your card allows cash advances. You can call the phone number on the back of your credit card to find out.
- Make sure you know how much of your cash advance credit limit is available. You can usually see this on a statement, or you could call the phone number on the back of your card.
- Find or set your PIN. This may have come with your card when you received it in the mail. If not, you will probably have to request it from the issuer by logging into your account online or calling the phone number on the back of your card. It might take 7-10 days to get the PIN set up.
- Understand the terms and fees for cash advances on your card. Figure out when you’ll pay it back, and do the math to figure out how much extra money you will be paying for the cash you’re getting.
- Think about other options so you don’t really have to get cash out with a credit card.
If you’ve decided to go through with it, find an ATM and withdraw cash with your card and PIN. You might also get charged a fee for using the ATM if it’s in a different network than your bank.
- Pay back the cash advance back as soon as you can. It will start accruing interest immediately, so if you don’t pay it back right away the debt could snowball out of control.
Example of cash advance scenario
- Let’s do the math for a hypothetical cash adane. Here are the assumptions of this example:
- You are doing the cash advance on the first day of your billing cycle
- The cash advance APR of your card is a certain percentage.
- The cash advance fee part of your cardholder agreement.
- You have a 30 day billing cycle.
- Our credit card company compounds interest on cash advances daily
If you wait until the end of this billing cycle before paying any of it back, how much will you owe?
This means for every day that passes, you will be charged an additional percentage of the total amount you owe on top of what you already owe.
That may sound like a low percentage, but by the end of your first billing cycle, you would owe more just in interest. When you add that to the cash advance fee and the amount you borrowed, you owe more.
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