Withdrawing Cash Using A Credit Card: Here's What You Should Know

Cash is still needed for many purposes, though digital payment methods have rapidly grown in recent years.

When we are out of cash towards the end of the month or need it in case of an emergency, the most likely response is to use now pay later services or to use the credit card at an ATM to withdraw cash. This may be the most convenient way to address a cash crunch instantly, but it's not a wise decision. 

Credit cards can be used to withdraw cash the same way we swipe a debit card at the ATMs. However, in the case of a credit card, certain charges are involved for getting the cash advance. The interest rates on cash withdrawal using credit cards are high, and it's not a financially prudent option.  

Here are the charges or fees you must pay when you swipe your credit card to withdraw cash. 

Cash Advance Fee

When you withdraw cash from an ATM with your credit card, a fee is charged for every such withdrawal. This fee usually varies from 2.5% to 3% of the amount withdrawn and added to your next credit card bill.

Interest

Interest is also levied on the amount you withdraw using the credit card. The interest rate on such cash withdrawals is usually high and could be up to 3.5% per month. In addition, credit card issuers don't offer any interest-free period for cash withdrawals as they do for regular transactions through credit cards. This means the interest charges are applied when you make a cash advance from your credit card.

Credit Score

Withdrawing cash using a credit card doesn't affect your credit score directly. However, due to its high charges, you may fail to pay the minimum due, and your credit card usage amount will also go up. This will affect your credit score negatively.

ATM Maintenance Fee

Most banks allow up to 5 free ATM transactions using credit or debit cards. Once you reach this limit, an interchange or ATM maintenance fee is charged. 

Benefits And Deals

When you swipe your credit card to pay at restaurants and shops, banks may offer you special discounts or deals. But, when you use your credit card to withdraw cash, you may be unable to avail of these benefits.

It is advised to withdraw cash from credit cards only when it is urgent and unavoidable.