Cash withdrawals using a credit card can be a quick and convenient way to access cash if you don’t have when you need it. However, it’s important to understand the implications of this type of transaction, as it can come with higher interest rates and additional fees. In this article, we will take a closer look at the things you need to know before withdrawing cash using your credit card, so you can make an informed decision and avoid any unexpected charges. So let’s dive in and learn about credit card cash withdrawals.
What does it mean to withdraw cash using credit cards?
Using a credit card to withdraw money from the ATM is called a cash advance. This is because you are actually taking out a loan on your credit card. Whatever loan or cash advance you get with your cash at the ATM comes with fees. These fees are added as part of your credit transactions for the month and they reflect on your credit card balance.
When you withdraw cash at the ATM using a debit card, you are withdrawing your own money. But when you use a credit card to obtain money from the machine, you are actually purchasing cash – and this attracts charges. So you pay your loan amount plus the accrued interest at the end of the month as visible in your credit card bill.
Should you use credit cards at the ATM?
It depends on your situation and your ability to pay. No one can be advised from getting cash advances using their credit cards, but this should be done after careful thought. You must go for credit card loans or cash advances only as a last resort. This is because of the fees associated with using your credit card to get cash at the ATM.
But if you don’t mind the credit card withdrawal charges and can clear off your balance at the end of the month, then it remains an option open to you. However, you must accept to pay the fees at the ATM before the cash is paid out to you.
Factors to consider before using your credit card at the ATM
Fees on your card and on the ATM When you use your credit card for a cash advance, you pay fees on the loan and also pay fees for using the ATM. What this means is that your credit card company charges you a fee for giving you a loan, and the ATM also takes a fee for converting that loan into cash.
- Interest rates on cash advances are high
Your credit card company indeed charges fees when you purchase stuff with your card. But the fees they charge for ATM cash withdrawals are higher. This is basically because credit cards are not designed for cash withdrawals – but for cashless purchases. Another thing to consider is that the applicable interest on your cash withdrawal is added to your bill almost immediately and there is no grace period to negotiate the payment.
- Impact on your credit score
Using your credit card for a cash advance at the ATM does not impact your credit score. But it becomes a problem when you are not able to clear off your balance as at when due.
- No added perks for cash withdrawals
Credit card cash advances reduce the amount of funds available for use on your credit card. It reduces your credit limit and may affect the unplanned purchase of bigger items. Another important factor to note is that ATM withdrawals using credit cards do not attract any reward points. No rewards or perks are applied to any credit card cash advances. No matter the amount you withdraw from the machine.
Withdrawing cash using a credit card can be a convenient option. But it’s essential to know the costs and implications before making this transaction. With higher interest rates, additional fees, and potential impact on your credit score. Carefully weigh the pros and cons before withdrawing cash with credit cards.
Before you consider using a credit card for cash withdrawals at the ATM or POS. It is best to consider alternative ways of withdrawing cash. Cash advances at the ATM should be used as a last resort.