You’ve probably used your debit card to withdraw money at an ATM countless times, but did you know you can also use a credit card at an ATM?
Many credit card companies let you use your card to get cash at an ATM; this transaction is known as a cash advance. But there’s a catch: cash advances are costly. For this reason, withdrawing cash with your credit card is generally not a good option unless you’re dealing with a financial emergency. Here’s what you need to know about cash advances and your less expensive alternatives.
How do cash advances work?
When you use a debit card to make an ATM withdrawal, that withdrawal is debited immediately from a linked bank account. However, a credit card withdrawal works differently. Instead of the funds coming directly from your checking account, they are pulled from your credit line.
While your credit card issuer might permit cash advances, these transactions typically come with fees and higher-than-normal annual percentage rates (APRs). There may also be limits on how much you can withdraw with a cash advance. These limits are often based on a percentage of your total credit limit.
For instance, you might only be able to withdraw 25% of your $10,000 credit limit via cash advance. Limits may vary by credit card issuer or card type, and you can find your cash advance limit in your credit card’s terms and conditions.
How much do cash advances cost?
The cost of a cash advance may also vary by credit card issuer and your type of card. But generally, cash advance fees range from 3% to 5% of the amount withdrawn. Some card issuers may charge a flat fee, such as $10, instead of a percentage-based fee.
That’s not the only cost to consider, though. Credit card companies generally apply a higher rate to cash advances, often up to 29.99%. According to Federal Reserve data, the average credit card APR is around 22.77% for accounts assessed interest.
These are the costs you’ll incur for a cash advance with some credit cards available today:
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First Access Visa® Card: $10 or 3% of the cash advance amount (whichever is greater) and a 35.99% cash advance variable APR
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Marriott Bonvoy Brilliant® American Express® Card: $10 or 5% of cash advance amount (whichever is greater), and a 29.99% cash advance variable APR (see rates and fees)
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United℠ Explorer Card: $10 or 5% of the cash advance amount (whichever is greater), and a 29.99% cash advance variable APR
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DoorDash Rewards Mastercard®: $10 or 5% of cash advance amount (whichever is greater) and a 29.99% cash advance APR
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Chase Slate Edge℠: $10 or 5% of the cash advance amount (whichever is greater), and a 29.99% cash advance variable APR
Here’s an example of what a cash advance repaid over three months might cost with a 5% fee and a 29.99% APR.
How to use your credit card at an ATM
If you’d like to use your credit card for a cash advance at an ATM, here are the steps you’ll need to take:
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Find an ATM that’s affiliated with your credit card, such as a Chase ATM if you have a Chase card. Doing so will help you avoid any extra costs.
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Insert your card and type in your personal identification number (PIN). You’ll need to contact your card issuer if you don’t have a PIN or don’t know it.
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Select”withdraw money” and input the amount you’d like to withdraw.
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The ATM will disburse your cash and debit it against your credit limit, and your card issuer’s cash advance APR will apply to that amount immediately.
You probably won’t be able to get a cash advance if your credit card is maxed out, or if the amount you need to withdraw causes you to exceed your credit limit.
Does using a credit card at an ATM impact your credit score?
Using your credit card at an ATM may impact your credit score, as the cash advance amount will increase your credit utilization ratio—the amount of credit you’re using relative to your overall limit. Your credit utilization is an influential factor in your credit score. Generally, it’s smart to keep your credit utilization below 30%, as doing so shows that you’re managing credit responsibly.
A cash advance may also hurt your credit score if you’re unable to repay it quickly. Cash advance APRs are higher than your regular credit card APR, so interest costs will add up faster, making it more challenging to pay off your card. You could see your credit score drop if you pay late or miss payments.
Alternatives to using a credit card at an ATM
While a cash advance can help if you’re dealing with a money emergency, it’s not necessarily the best option. That’s because using your credit card to withdraw money from an ATM is expensive, as cash advance fees and high APRs apply. There may be less expensive alternatives for getting the money you need, including:
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Use your savings: If you have money stashed in an emergency savings account, using that to cover a cost could make sense. You won’t pay interest or worry about taking on more debt.
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Paycheck advance: Consider asking your employer for an advance on your paycheck if you need help paying for an expense fast. A paycheck advance lets you borrow against an upcoming check. Paycheck advance apps are also available if your employer doesn’t offer this option. Many of these apps don’t charge interest but may charge fees.
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Borrowing from family: A no- or low-interest loan from a family member or close friend could also be a less expensive alternative. If you go this route, work out payment details in advance to ensure both you and your loved one are on the same page.
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Personal loan: A personal loan might also be an option if you have decent credit. Many lenders require good or excellent credit for these loans, but if you qualify, you can generally get your loan funds within a few business days. A personal loan will generally have a lower rate than a cash advance.