How I Can Get Cash From My Credit Card

Accessing cash through your credit card might seem like a quick fix when funds are tight. However, it's crucial to understand the mechanics and implications before utilizing this option.

While credit cards are primarily designed for making purchases, many offer the ability to obtain cash advances. Understanding the associated fees, interest rates, and impact on your credit score is vital. This article outlines the various methods of accessing cash from your credit card and the potential drawbacks.

Cash Advances: The Direct Approach

The most straightforward way to get cash is through a cash advance. This involves using your credit card at an ATM or bank to withdraw cash directly.

The process is similar to using a debit card, but the money isn't coming from your bank account. Instead, it's borrowed against your credit limit. Almost all credit card companies offer cash advances.

However, cash advances come with significant costs. According to a 2023 report by the Consumer Financial Protection Bureau (CFPB), cash advances typically have higher interest rates than purchase transactions.

Higher Interest Rates and Fees

These interest rates are often significantly higher and are applied immediately. Unlike purchases, there's usually no grace period for cash advances.

Additionally, most credit card issuers charge a cash advance fee. This is often a percentage of the amount withdrawn or a flat fee, whichever is greater, as stated by Experian in their consumer credit guides.

For example, if your card has a 25% APR on cash advances and charges a 5% fee, a $500 cash advance would cost you $25 in fees upfront. This is before even considering the accumulating interest.

Convenience Checks: Another Option

Some credit card companies offer convenience checks. These are essentially blank checks that you can write, drawing against your credit line.

They can be used to pay bills, make purchases where credit cards aren't accepted, or, of course, obtain cash. TransUnion notes that convenience checks often come with similar fees and interest rates as standard cash advances.

Therefore, it's important to read the fine print on any convenience checks you receive. Understand the terms and conditions before using them.

Balance Transfers: Indirect Cash Access

While not a direct cash withdrawal, a balance transfer can free up cash. This involves transferring a balance from a higher-interest credit card to a new card with a lower interest rate or a promotional 0% APR period.

If you have available credit on the new card after the transfer, you could potentially use your existing credit card for purchases. This frees up cash that you would have otherwise used to pay down the high-interest debt.

NerdWallet cautions users to be aware of balance transfer fees. These fees usually range from 3% to 5% of the transferred amount.

Carefully calculate whether the potential savings in interest outweigh the upfront transfer fee.

The Impact on Your Credit Score

Regardless of the method used, any cash drawn from a credit card can impact your credit score. High credit utilization, the amount of your available credit that you're using, can negatively affect your score.

Credit utilization is a significant factor in credit scoring models. Keeping your balance low relative to your credit limit is crucial.

The Fair Isaac Corporation (FICO), a leading provider of credit scores, emphasizes the importance of responsible credit management for maintaining a good credit score.

Furthermore, consistently missing payments on your credit card balance, including cash advances, will negatively impact your credit score. This makes it difficult to obtain loans and other forms of credit in the future.

Alternatives to Credit Card Cash

Before resorting to cash advances, explore alternative options. Consider a personal loan, which often has lower interest rates than credit card cash advances.

Borrowing from family or friends may also be a viable option. Consider selling unwanted items or exploring side hustle opportunities to generate extra income.

Remember that obtaining cash from a credit card should be a last resort due to the high cost and potential impact on your financial well-being.