There can be many reasons why you might want to use a credit card at an automated banking machine (ATM). Perhaps you’ve been faced with unexpected car repairs or some other emergency that requires funds that you don’t have in your bank account. Maybe your child has an expense that you can’t cover. Whatever your reason for using a credit card to withdraw cash, it’s essential to understand what you’re getting into. Here, we’ll cover the ins and outs of going through your local bank or credit union for a cash advance, and give you options that can save you money.
Can you use a credit card at an ATM?
The short answer is yes, you can use a credit card at almost any ATM to withdraw money. Whether the ATM is located at a bank, credit union, or other financial institution, ATMs are set up to allow you to conduct all kinds of activities, including using a credit card to obtain an ATM. cash advance.
Before removing the plastic, read on. There are things about using a credit card to take an ATM cash advance that you should understand. Once you know all about cash advances, you’ll be in a much better position to make an informed decision.
What is a cash advance?
When you borrow funds from a credit card, it is considered a cash advance. There are several ways you can use a credit card to get a cash advance.
- At an ATM
- In person at a bank, credit union or other financial institution
- By writing a “convenience check” that may have come with your credit card
How to use a credit card at an ATM
If you’ve ever used a debit card to withdraw funds from an automated teller machine (ATM), you’ll probably find it easy to use a credit card instead. The differences are slight, and as long as you follow the onscreen instructions you shouldn’t have any issues.
Here are two steps you will need to take before arriving at the ATM:
1. Make sure you know the personal identification number (PIN) associated with the credit card. If you forgot it or never created one, call the credit card company (you can find the phone number on the back of the card). Customer service should be able to provide you with the PIN code or help you set one up. You will need this number before you can complete the transaction at the ATM.
2. While you have the credit card issuer online, be sure to ask the following questions:
- What is my current balance?
- What is my credit limit? You will need a limit high enough to cover the amount you plan to withdraw, the cash advance fee charged by the credit card company, and the transaction fee charged by the owner of the ATM.
- What is my cash advance limit? This is different from your credit limit because it represents the amount that the card issuer will allow you to use as a cash advance.
Before the representative of the credit card company answers your questions, expect them to ask their own questions. They want to make sure that you are the legitimate cardholder and not someone trying to make a fraudulent transaction.
Once you’re at the ATM and insert your card, there are just six steps left, each requiring you to follow the on-screen instructions. While the wording may vary among ATMs, they should all work along these lines:
- Enter the PIN code
- When prompted, select “cash advance”
- Select “credit card”
- Enter the amount
- Read and agree to the terms, including fees
- Withdraw your money
The high cost of a cash advance
Unless you don’t have other options, a cash advance rarely makes sense (don’t worry, we’ll cover the alternatives in a moment). Here’s why:
- High interest rate: If you look at the APR charged on your credit card for everyday purchases, you will likely find that the APR for a cash advance is much higher than the rate you pay for traditional purchases.
- ATM fees: Unless the ATM you are using is in your personal bank, you will likely need to pay additional ATM usage fees.
- Cash advance fees: The cash advance fees charged by most credit card issuers typically range from 3% to 5%. Let’s say you take out an advance of $ 500. The fees charged by the issuer will be between $ 15 and $ 25.
- Over Limit Fee: Since your cash advance limit is not the same as your spending limit, it’s easy to go over your authorized amount. If you do (even if it’s the fees that push you past it), you could be hit with an over limit fee equal to the amount you went over. Let’s say your cash advance limit is $ 500 and the fee has pushed you to $ 530. If you accepted the over-limit charge from your credit card company, you may have to pay an additional $ 30 for the over-limit. Otherwise, your credit card company may decline the transaction.
- Missing grace period: You usually have at least 21 days to pay the charges without incurring interest. When you take a cash advance, there is no grace period. You are charged interest from the day the money is withdrawn from the ATM.
Alternatives to a credit card cash advance
If you need cash fast, an ATM cash advance isn’t your only option. Here are a few more to consider.
Personal loans are versatile financial products and most lenders don’t care how you spend your money. If you have a good credit rating, it will be easy for you to get a loan from any lender, in person or online. Better yet, the interest rate for borrowers with a high credit rating is almost always lower than the average rate on a credit card. Even if you don’t have a good credit score, you may find this rate significantly lower than the rate charged for a credit card cash advance. The only catch is, if your credit rating is low, you will likely have to pay expensive loan fees.
If you are only looking to borrow a small amount, it is worth applying for a loan from your bank. No matter where your credit score is, your bank knows you and can quickly see how well you are paying your bills and managing your money. If possible, offer guarantees. Collateral is something of value that you put in exchange for the loan. It can be anything of value, from a classic car to coins or jewelry. The good news is that it will increase your chances of landing the loan. The less good news is that the bank has the legal right to repossess the collateral and sell it if you don’t make the payments as promised.
Tap family or friends
Let’s say you only need $ 500 and you can pay it off within the next four to six weeks. As long as you’ve never taken them out with a loan before, it’s fair to ask someone who cares about you to pay the money. Make sure you create and sign a promissory note, and then keep your promise to repay.
Whatever you do, avoid payday lenders at all costs. Their interest rates often exceed 400% (despite what they can tell you), and you’ll likely find yourself in an endless struggle to pay them off without taking out a second loan to cover the first.