Getting cash from your credit card is called a cash advance. A cash advance borrows money from your credit card account instead of using the credit to buy something. This option can be helpful if you find yourself in an emergency and need cash.
A Federal Reserve study in 2017 stated that 44% of adults could not cover an emergency expense costing $400, or would cover it by selling something or borrowing money. This is an improvement from the 50% of adults who weren't ready for emergency costs when asked in 2013. If at all possible, it's critical to have emergency cash on hand for when life delivers an unexpected situation.
How to Get Cash From Your Credit Card
Getting cash from your credit card is simple and here are the steps to take:
- Check your latest statement to confirm how much cash you can take out. Your cash advance limit can vary depending on the type of card you have.
- Read the terms of your agreement so you understand if there are fees associated with taking out cash. Usually, there is a one time fee plus interest, and rates are often higher for cash advances than when you charge purchases.
- Know your personal identification number or PIN number that was assigned to your credit card.
- Withdraw money from an ATM where your credit card is accepted. Select "credit" when prompted to make a withdrawal from checking, savings or credit.
- Go to a bank to withdraw money against the limit on your credit card. Check that the bank offers advances from your credit card issuer, such as Mastercard or Visa.
Can I Get a Cash Advance Online?
Another way to receive cash is through a cash advance loan online. An online cash advance loan works when you apply with an online lender for a short-term loan. You fill out an online application and once approved you find out how much money you qualify for.
That money can then be used as an emergency fund to pay off those unexpected bills or expenses. The payment for a cash advance loan can include a fee on top of the monthly payment that is due.
Are Cash Advances a Bad Idea?
Many personal finance experts caution that cash advances from your credit card can be a bad idea and suggest to only use them in an emergency situation. Cash advances from your credit card can be a really expensive short-term loan as the current average interest rate for cash advances is 23.7%, according to CreditCards.com.
Notably, credit reports do not indicate when a cash advance is taken against a credit card account; so cash advances do not directly affect your credit history (as long as you pay them back in a timely manner).
Should I Get a Cash Advance From My Credit Card?
You should ask yourself some questions before getting a cash advance:
- Is the cash advance an emergency to take care of a bill or expense?
- Can you pay the money back in a month or in a few months?
- Can you borrow money from a friend or family member?
- Do you really need to buy what you are about to buy?
- Do you need help improving your personal finance habits?
The more you can learn more about credit, finances and budgeting could help to improve your own situation in the short term versus taking on extra debt.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.
This article was originally published on December 21, 2017, and has been updated.