Do You Get Charged for Taking Money Out of a Credit Card?

When you take money out of your credit card, the procedure is called a cash advance. It might seem pretty cool when you need some extra bucks to simply use your credit card to get instant cash, but "cool" is not the operative word here -- "mistake" is. It might be convenient to get some fast, easy cash, but you pay a hefty price for doing so.

TL;DR (Too Long; Didn't Read)

Opting for a cash advance on your credit card gives you access to additional funds, but it comes with fees, and often higher interest rates.

Common Scenario

When you need cash, you typically need it fast. You get that fast service when you take a cash advance from your credit card, but you should also understand the costs involved and how they work. You can take cash from your credit card using an ATM, just as you would when you use your debit card. The process might seem the same, but your credit card issuer doesn’t treat it the same.

Just the Facts

You have a limit to how much cash you can take. You can’t just take out $1 million, for instance. You have a cash advance limit that you need to consider, which is typically less than your credit card limit. Then, there’s the transaction fee that you pay for the privilege of borrowing the money.

On top of that is the interest you pay on the cash you borrow — interest that’s generally higher than the annual percentage rate you pay for regular credit card purchases. Worse, the money you take out starts accruing interest at the time of withdrawal, not 30 days later, which is typical with most regular credit card purchases.

Why You'd Do It

If you have an emergency, it’s nice to know that you can take a cash advance from your credit card. For example, if you have a smaller paycheck than usual one month but have the same bills to pay, you might not have enough money in your bank account to cover your expenses for the month, or you might have unplanned expenses.

Taking a cash advance from your credit card to get you through a tough month is typically better than taking out a payday loan, a title loan or some other type of predatory loan, but it’s really only one step better.

Better Options

It’s better to simply use your credit card as a credit card than to take a cash advance. The interest you pay will be less, and you probably won’t pay a transaction fee. Better yet, start a savings account that you can use for emergencies instead of resorting to taking cash advances.

If you need to take a cash advance, take as small an advance as possible. Sometimes, transaction fees are a percentage of the amount you borrow, so the larger the advance, the bigger your transaction fee. If there is a flat-rate fee per transaction, then take a large enough amount to prevent you from needing to take multiple advances.

the nest