Things to Know Before Swiping Your Credit Card at an ATM

22 NOVEMBER, 2021

When you use your credit card to withdraw cash from an ATM, it is known as credit card cash withdrawal or cash advance. Generally, credit cards are used for card transactions. The credit card cash withdrawal facility is an additional feature offered by the issuing bank. Your bank may permit you to withdraw cash within a set limit. You will have to repay the same along with interest and other charges.

What is a Credit Card Cash Withdrawal Fee?

The credit card withdrawal fee or cash advance fee is a nominal amount you will have to incur every time you withdraw cash using your credit card. Generally, it is a percentage of the withdrawn amount.

Using your credit card to withdraw cash also attracts interest charges. You will have to incur finance charges from the date you withdraw cash from an ATM till the amount is repaid in full. It is worth noting that even if you make multiple credit card cash withdrawals on a given day, you will have to incur charges for each transaction based on the amount withdrawn.

How Does Cash Withdrawal Credit Card Work?

If you are wondering, can we use credit card at an ATM? Then the answer is yes! Cash withdrawal with credit cards are beneficial during a financial emergency and the process is easy and instant. Swiping a credit card for cash works the same as with a debit card. You just need to swipe it in an ATM and withdraw cash as per requirement, but it comes with an additional charge as well as a viable interest rate. Also, the number of withdrawals along with the minimum and maximum limits per day needs to be kept in mind.

How to Withdraw Cash Using a Credit Card?

The process of withdrawing cash from an ATM using your credit card is as simple as using your debit card. You will need to find an ATM, insert your credit card, and follow the instructions for cash withdrawal. You can withdraw funds from any nearby ATM, but you will need to be wary of the cash advance fee you will have to pay for making a withdrawal. You will also have to keep an eye on the minimum and maximum cash you can withdraw per ATM transaction or per day.

Therefore, you will need to know the terms and conditions applicable to your credit card before buying one. For instance, you will need to know fees and interest charges associated with your credit card cash withdrawal facility. Also, you must know the available cash limit on your credit card before opting for a cash advance. If you withdraw more than the limit assigned to you, you will be charged an additional over-limit fee along with other charges.

Advantages of Credit Card Cash Withdrawal

The benefit of credit card cash withdrawal is that it provides instant access to liquid cash. Most ATMs are available 24x7. It means that you can have access to liquid cash at any time.

Unlike other types of credit, you do not have to provide any document or get approval from your bank to opt for a cash advance. If you need cash, you can use your credit card at an ATM and follow a simple cash withdrawal instruction.
If you keep a decent track record without any late payments, you are eligible for limit enhancement on your credit card. Upon approval of credit card limit enhancement, you can withdraw and spend based on your needs.

Disadvantages of Credit Card Cash Withdrawal

Fees: Every time you withdraw cash from your ATM using one of your credit cards, you will have to pay a certain fee which further attracts interest charges. You will be charged interest from the date of the transaction till you repay the balance in full.
Interest rate: The interest rate on cash withdrawal is charged from the date of transaction till the payment is made in full. Depending on the type of credit card you use, the interest charges on outstanding balances start from 3.1% and can go up to 3.5%.
Reward points: If you use your credit card to withdraw cash from ATMs, you are not eligible to get any reward points. No matter how big your purchase transaction is, you are not eligible for any reward points for credit card cash withdrawals.
Interest-free period: Another disadvantage of credit card cash withdrawal is that there is no interest-free period to avail of. The interest rate continues to pile up till you repay the amount in full.

Mistakes People Usually Make On Using The Credit Card at ATM

While cash withdrawal from credit card at an ATM, people usually make a lot of mistakes which can be avoided to make the experience hassle-free. Some of these are:

Repeatedly withdrawing cash

Making cash withdrawals frequently must be avoided as this can burden you with extra interest charges and added fees.

Late payments

Making late payments must be avoided because this can burden you with added late payment charges and can diminish your credit score.

Maxing out credit limits

Maxing out on your credit card limits must be highly discouraged as it comes along with over-limit fees.

How do Cash Advances Affect Your Credit Score?

When you opt for a cash advance, banks may not report it separately. The entire outstanding due and the non-payment of the same will be reported to the credit rating agency as a whole. So, withdrawing cash from an ATM using your credit card may not have a great impact on your credit score. But, because of high interest rates and additional fees levied on cash advances, you may not be able to make timely monthly payments.

When you fail to pay even the minimum amount due, it will reflect on your credit report. Hence, hurting your credit score. So, if you make timely repayments, there will not be any effect on your credit score due to credit card cash withdrawal.

Also Read: Credit Card Cash Withdrawal & Charges

In short

A credit card cash advance is a great way to access instant funds during emergencies. However, you will have to incur a cash withdrawal fee and interest charges for using your credit card to withdraw cash. If you wish to avail yourself of a waiver of ATM withdrawal charges, make sure to pay your dues on time and have a neat repayment record.