Managing your money can be tricky, but you’re probably thinking, “Can you use a credit card at an ATM?” Whether it’s a crisis or a matter of convenience, you need to understand how this method works, how much it costs, and what more worthwhile options you have. This broad guide will guide you through everything you need to know.
Key Takeaways
- You can use a credit card at a cash machine to withdraw money, known as a cash advance.
- Cash advances come with high fees and interest rates, often starting immediately after the withdrawal.
- Smarter alternatives like peer-to-peer payment apps, debit cards, or personal loans might save you money.
- Review your credit card’s terms and conditions to avoid unexpected fees or restrictions.
How to Use a Credit Card at a Cash Machine
Yes, you can use a credit card at a cash machine to withdraw money, but it works differently from using a debit card to remove money. Here’s what you ought to understand:
Steps for a Cash Advance
- Insert Your Card: Slip your credit card into the ATM as if it were a debit card.
- PIN: Be mindful of the PIN associated with your credit card. If you don’t have one, go out to your card issuer to select one.
- Choose The Amount: Input the part that you would like to start, placing the card’s cash advancement limit.
- Collect Your Cash: Once you approve the transaction.
Pro Tip: Before attempting this, confirm your credit card’s cash advance limit, which is often less than your total credit limit.
Important Considerations
- Fees: It’s customary to pay a cash advance fee, which can be 3% to 5% of the transaction.
- Interest Rates: Interest begins accruing and can be at rates as high as 20% or more.
Limits: Your cash advancement limit is usually lower than your available credit limit.
Benefits of Using Credit Cards at ATMs
Although expensive, cash advances can be useful in certain scenarios:
Emergency Cash Access
Cash advances can save the day when other payment methods are not accepted, especially in emergencies such as a medical need or travel emergency.
Global Accessibility
Credit cards are generally accepted at ATMs around the world, making this option convenient for international travelers.
Quick Cash
You can get cash or cash advances within minutes without stepping into a bank or borrowing from anyone else.
Risks and Drawbacks of Credit Card Cash Advances
As convenient as they may be, cash advances are marked by serious downsides:
High Fees
- Cash advance fees: 3%-5% of the amount withdrawn.
- ATM operators may impose extra charges.
Immediate Interest
Unlike purchases, cash advances begin accruing interest on day one, typically at a rate greater than 20%.
Impact on Credit Score
Cash passages use a substantial amount of your credit limit, and that can improve your credit utilization ratio, resulting in a reduction in your credit score.
How to Minimize Fees and Costs
If you’re forced to use a credit card at an ATM, try these strategies to mitigate the financial hit:
- Avoid Frequent Withdrawals — No cash advances, except in case of emergencies.
- Pay Back At Once — You should pay off the cash advance ASAP to limit interest.
- Go with Low-Fee Cards — Certain credit cards provide lower cash advance fees or promotional rates.
- Know the Terms — Check your card’s cash advance terms to avoid unpleasant surprises.
Credit card cash advances are quite different from debit card withdrawals. Credit cards often come with steep fees, such as a cash advance fee, in addition to any charges associated with using the ATM, while debit cards are used at little to no cost.
You’re charged interest on credit card cash advances immediately and at high rates—often above 20%—while debit card withdrawals do not accrue interest. Also, cash advances can affect your credit score if you use a credit card due to higher credit utilization, while they don’t with a debit card.
Alternatives to Credit Card Cash Advances
Before opting for a cash advance, try these alternatives:
- Use a Debit Card
No interest, no fees: simply take money out of your checking account. - Peer-to-Peer Apps
Want to send money fast without withdrawing cash? Apps like Venmo, Zelle, or PayPal let you transfer money instantly. - Personal Loans
With larger amounts to borrow, personal loans tend to have lower interest rates and more manageable repayment terms. - Emergency Savings
Often, the most economical way to manage an emergency is to have a separate savings account.
Tips for Safe Transactions
So, to keep you safe and your money safe, here’s what to do:
- Protect Your PIN
Select a difficult guess PIN, and block it when putting it in at an ATM. - Verify the ATM
Use ATMs that are well-lit and safe, and attached to trusted banks. - Monitor Statements
Make it a habit to check your credit card statements to confirm that all transactions are valid. - Safety Tactic
Do not give up the aspect of turning to fraud or theft.
Conclusion
While you can use a credit card at a cash machine, it can be very expensive with the fees and interest rates charged. But in this situation, it’s best to consider alternatives such as a debit card, a personal loan, or borrowing from your emergency savings account — it’s usually less costly. Always check the terms of your credit card and budget for payments as soon as possible to discourage financial harm.
What has been your experience in cash advances? Leave your best tips in the comments down below and don’t forget to take a look at our other blogs about personal finance and how to manage your credit!