Can I Withdraw Cash From My Credit Card?

A credit card is a useful tool to help you substitute the need to carry cash or credit. You can make purchases in-person or online, up to your credit limit. Essentially, a credit card lets you borrow money and pay your credit card balance when you receive your monthly credit card statement.

There are many features and perks with a credit card, such as earning points or cash back, building your credit history, protecting against fraud, and enjoying credit card protection and insurance. Some credit cards also offer extended warranty coverage for your purchases.

But what happens when you need to withdraw cash and only have your credit card? Can you make a cash withdrawal from your credit card from an ATM like a debit card? While the answer is yes, it may not be something most people would recommend as there are a few consequences.

Let's dive into what it means to withdraw money from your credit card, how you can do it, and why it may not be your best choice.

Can you use a credit card at an ATM?

Yes, you can use a credit card at any ATM. However, it may not be a recommended practice. You can withdraw money from an ATM with your debit card anytime, as it's money you already have in your bank account. However, when you withdraw money with a credit card, it's called a cash advance and involves a cash advance fee. Since withdrawing money with your credit card costs money, it's better to use your checking account to get cash from an ATM instead.

What is a cash advance?

A cash advance is a cash withdrawal from an ATM using your credit card. A credit card allows you to make purchases in advance by borrowing funds from the credit card company up to your available credit each month. Just like when you purchase at a store, you're buying cash from the credit card issuers when you're withdrawing money from an ATM with your card. The money withdrawn gets added to your account balance, and you can see your total on your credit card bill. You're responsible for paying the amount on your statement on time.

Cash advances come with cash advance fees. The one-time flat rate fees and cash advance interest rates are typically high. The average cash advance APR is typically around 22.99% in Canada. It is a separate interest rate charged by the credit card company different than the rate charged for purchases and balance transfers. The cash advance APR is typically higher than the purchase or balance transfer APR.

Is there a cash advance limit?

Credit companies have a cash advance limit, which caps the amount of money you can withdraw from your credit account at an ATM. The limit is a percentage of your overall available credit. The withdrawal with your credit card is a short-term loan against your cash advance limit and decreases your available credit by the amount taken. It will also increase your credit utilization, which could negatively impact your credit score if you take out too much money and make it harder for you to boost your credit.

How to use a credit card to withdraw money

You can take a credit card cash advance to access cash in a few ways.

At an ATM

A common way to access cash from your credit card is to go to an ATM. You may have to go to an ATM from your credit card company or any ATM available. Some machines charge an ATM fee whenever you use it, which means you have to pay additional fees on top of the cash advance fee. If you have a credit card pin, you can get cash the same way you would with a debit card.

At a bank

If you don't want to use an ATM, you may be able to get a cash advance withdrawal at a bank branch of your card issuer. Go to the bank teller and tell them how much cash you want with your credit card. The bank may charge a flat fee and applicable interest rates for the cash advance. Be prepared to show your ID if they ask for it.

Get convenience checks

Some credit card companies mail you convenience checks tied to your credit card's cash advance limit. These are blank checks you can use anytime to make a payment. You can write a convenience check for the amount you want to withdraw, which will apply to your cash advance limit.

How much does it cost to withdraw cash from a credit card?

The cost of a cash advance varies based on the credit card issuer. However, you can expect a cash advance to be more expensive than making regular purchases with your credit card or withdrawing cash with your debit card. Here are some fees you'll likely incur with a cash advance.

Cash advance fees

Most credit card companies charge a flat fee whenever you use your credit card at an ATM. For example, they may charge $10 per cash advance you take. Other issuers may charge cash advance fees based on a percentage of the money you withdraw.

ATM and bank fees

Financial institutions charge ATM and bank fees for their services. You may have to pay an ATM fee if you withdraw too much money or use an ATM outside your credit card company's network. You pay these fees at the time of the transaction rather than when you get your monthly statement.

Interest rate

Interest rates on cash advances are typically higher than on other purchases and transactions, and the interest charges can stack up over time. These charges can make cash advances quite expensive. You start accruing interest when you withdraw the money and will see the interest fees on your credit bill.

Things to consider before taking a cash advance

Sometimes, you may find yourself in an emergency where you're strapped for cash and only have your credit card or don't have enough money in your debit account. It's okay to take money from a credit card if you don't have any other options, especially if you don't do it often. However, there are some things to consider before taking a cash advance.

High interest rates and fees

The credit card issuer charges high interest rates and fees when you borrow money from your credit card. Most credit card companies don't have a grace period, and the cash advance starts to accrue interest the day you get it. You don't have time beforehand to pay off the balance. There's always a risk of debt accumulation if you aren't careful with repayments, especially if you only make minimum payments on your credit card bill.

Negative effects on credit scores

It can be hard to have a strong credit history if you frequently take cash advances. Borrowing money with your credit card can decrease your credit score if you don't pay off the balance quickly. Since the cash advance and related fees come out of your credit limit, you can quickly increase your credit utilization ratio as the interest accrues.

Financial institutions and lenders look at your credit score when you apply for a personal loan or want better terms on existing loans. Lenders may view cardholders as a credit risk if they have a lower credit score and many cash advances on their report. A lower credit score may give you challenges when applying for a new credit card or taking out a car or mortgage loan. Landlords and companies may also do a credit check when you want to rent or apply for a job.

Ability to pay off the cash advance

A cash advance is essentially buying cash from the credit card issuer. Just like how you pay your monthly credit bill for the purchases you've made, you also have to pay off the cash advance. If you have trouble paying your credit card balance or have loan repayments already, accumulating additional debt may not be a good idea. Relying on cash advances to make purchases can also lead to poor financial habits, such as a borrowing cycle. It makes it more difficult to get out of debt and create a strong foundation for future success.

Cash advances can trigger higher credit card interest rates

Credit card companies pay attention to your spending patterns. Frequent cash advances can be a signal of an underlying financial problem. They may lower your cash advance limit to reduce the money you can withdraw. Some people have a separate cash advance limit lower than their normal credit limit.

What are some alternatives to a credit card cash advance?

Cash advances are expensive, so it's a good idea to consider alternatives when you need to get cash quickly.

Use your credit card

Instead of withdrawing money from your credit card, you can purchase with your card. You won't pay an upfront flat fee and have a grace period to pay off the balance before accruing interest. Be careful of your credit limit so you don't pay overdraft fees. Your interest rate will also be lower since you don't have the cash advance fee.

Secured credit card

A secured credit card requires a cash deposit to insure purchases. The deposit acts as collateral and gives the card issuer security if you don't make payments. Your deposit becomes the available credit on your credit card. Secured credit cards are less risky for credit card companies to issue and can be a powerful tool to help you build credit in Canada.

Get a personal loan

You can get a personal loan from a financial institution to cover expenses. Most loan issuers want to see a good credit score, as they want a borrower with good credit and payment history. A higher credit score can increase your chances of approval and getting a better interest rate. A lower credit score can result in higher interest rates and a more challenging time of finding a lender.

Use your debit card

A debit card links to your checking account, which is money in your bank account you own. You can easily visit any ATM or branch to withdraw money without paying upfront or cash advance fees. However, you may pay an ATM fee if you use a machine outside of your card's network.

Set yourself up for success with KOHO

Managing your finances can be tricky, especially when figuring out the best route for withdrawing money you need. A KOHO virtual card has guaranteed approval for instant spending while earning cash back. Instead of getting an expensive cash advance, simply unlock your phone to access your virtual card whenever you travel or shop online and in person.

Unexpected things happen, and we understand you may need quick cash occasionally. We offer overdraft protection coverage to give you up to $250 interest-free cash advance for moments when you're strapped for money. You don't have to worry about credit checks, application processes, or lowering your credit score.

We give you all the flexibility and options you need to build your credit with KOHO, monitor your financial health with a free credit score, and earn interest with a high-interest savings account. Learn more about how we can support you on your journey to financial success.