Table of Contents

How Cash Advances Work
What is the cost?
If it doesn't involve cash
What is the point at which it makes sense?
The Bottom Line

Personal Finance Credit Cards

Can You Withdraw Money from your credit Card?

Cash advances from credit cards offer instant access to cash, however, they come at a price.
By Rebecca Lake
Updated June 06, 2021
Written by Thomas J. Catalano

If you require cash in the event of an emergency or to pay your bills, you could think about whether it's possible to cash it out of your card. Many credit card companies do allow you to draw money from your account via the process of a cash advance. While it can be useful in times of need but cash advances do have some drawbacks to consider. When using cards with credit to access cash, it's important to weigh the advantages and disadvantages.
Important Takeaways

A lot of credit card companies permit the withdrawal of funds from your account via the cash advance.
Based on the card, you may be able to withdraw cash by putting it into a bank account, using the ATM card or by writing a convenience check.
Cash advances can be more expensive than purchases or balance transfers and, as they are credited with interest, it begins to accrue on them immediately. They also typically have fees.

How Credit Card Cash Advances Work

Typically credit cards are designed to be used for making purchases. For example, you can use your card at the checkout in shops or input your card number and expiration date to purchase items online. If you buy something, your available credit is reduced by that amount until you have paid your credit card charge.

Cash advances from credit cards differ in their operation. If your card allows for cash advances (and they're not always available), you might have one credit limit for purchases, and a different limit for cash advances which is usually lower than your purchase limit. If you make a cash advance you are borrowing against your credit limit.

Additionally, cash advances begin accruing interest immediately--unlike purchases, where you typically have a grace period of 20 to 30 days in which to pay off your debt before interest starts accruing.

There are several ways to obtain an advance in cash, such as:

A cash transfer request from your credit card to your bank account
Withdrawing cash at an ATM
Write a check of convenience to yourself and cashing it at an ATM or a bank

You should be able to determine the cash advance limit you have by looking at your latest credit card statement. If you don't find it, contact your credit card company to inquire whether cash advances are a possibility on your card, and in the event that they are, what your limit is.
How Much Does it Cost to Withdraw Cash From an Credit Card?

Cash advances aren't cheap. There are several charges to be aware of when taking one.

The first is the cash advance charge. It's a cost that charged by the card provider for the convenience of withdrawing cash from your cash advance limit. It may be either one-time cost, like $5-10, or it could be a percentage of the amount, or greater. The amount could differ depending on the card.

You may also have to pay additional charges when withdrawing funds from credit card at an ATM or branch of a bank. An ATM surcharge may apply, or you might be required pay a teller charge for this convenience.

The second component of the cost of cash advance is the annual percentage rate (APR). In the majority of cases, the cash advance APR is higher than the regular APR for purchases or balance transfers. As mentioned earlier 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 access cash. Compared to a short-term personal loan such as a credit card the cash advance may be a lot more expensive and carry a greater interest rate.

In contrast to purchases, there is no grace period for credit card cash advances. Interest begins accumulating right away.
Cash Advances that don't require Cash

In some instances, transactions can be treated as cash advances even if you're not transferring cash. For instance, if you connect your credit card with a bank account for overdraft protection , any funds used to cover overdrafts could be considered to be a cash advance. It is also possible that certain transactions, like the use of your credit card to purchase cryptocurrency, are treated as cash advances instead of purchases.

This is why it's important to study the conditions and terms carefully to ensure you know what isn't considered to be a cash advance.

If you pay through your credit card, the minimum balance due will be applied to your regular purchase balance first. Any additional payment is applied to the balance that has the highest APR following. Therefore, if you have a balance of purchase on your card, you may have to pay it in full before any payments are added to the cash advance.1
What is the best time to withdraw cash from your credit card?

The option of withdrawing money from your credit card may seem like a great option if you're in a bind financially. For instance when your car has a problem and you need to pay for a tow truck firm that doesn't take credit cards, it may be your only choice.

If the issue isn't urgent, you could consider other options for getting cash, as advances on credit cards is costly. For instance, you might consider:

Applying for an unsecured personal loan
borrowing money from family or friends
Taking out the home equity loan
Indrawing funds from an IRA or making an 401(k) withdrawal or loan
Liquidating CDs or selling other assets in order to raise money

Each of these options has pros and cons, much like a credit card cash advance. The tapping of retirement accounts, like could be a convenient option to earn money but it could also result in tax-related penalties. And even if it doesn't however, you're still reducing your retirement nest egg. Home equity loans are a great option for low-interest rates, but you're putting your house on the line as collateral. Borrowing from friends and family can bring money into your pocket without interest, but it can be a cause for relationship issues in the event that you aren't able to pay it back as agreed.
Note

A 401(k) loan essentially means borrowing money from your. But bear in mind that if you leave your job due to any reason before the loan is paid back in full, you'll need to pay it back in full and fast or it'll be regarded as a taxable distribution.
The Bottom Line

Cash advances from credit cards have some benefits, but they can be costly compared with other ways to get money. If you're in need of funds, but aren't in a major situation, you should take the time to investigate other options before committing to a credit card cash advance. And if you do end up withdrawing cash from your credit card make sure you pay off the balance as fast as you can in order to limit the costs of interest.
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