Have you ever wondered if you can use a credit card at an ATM? The short answer is yes, but it’s not as straightforward as using a debit card. While credit cards allow you to access cash, it comes with a cost.
Whether you’re in a pinch or just curious about how it works, this article will guide you through the process, explain the potential fees, and help you decide if using a credit card at an ATM is the right move for your finances.
How does using a credit card at an ATM work?
When you use a credit card at an ATM, you’re essentially taking out a cash advance. This means that instead of using money you already have, like with a debit card, you’re borrowing money from your credit limit.
It’s important to know that cash advances differ from regular credit card transactions. They often come with higher fees and interest rates, which can add up quickly if you’re not careful.
To use a credit card at an ATM, the process is similar to using a debit card:
- Insert your credit card into the ATM.
- Enter your PIN (if you’ve set one up for cash advances).
- Select the amount of cash you want to withdraw.
- Confirm the transaction.
Once completed, the cash is yours to use, but the amount will be added to your credit card balance, along with any associated fees.
The costs of using a credit card at an ATM
While getting quick access to cash can be convenient, there are several costs associated with using a credit card at an ATM. Let’s break down the most common ones:
- Cash advance fees: Most credit card companies charge a cash advance fee, which is typically 3% to 5% of the amount you withdraw. For example, if you take out $200, you could be charged between $6 and $10 just for the withdrawal.
- Higher interest rates: Cash advances usually have higher interest rates compared to regular purchases. While your standard credit card purchase might have an interest rate of 15% APR, a cash advance could come with a rate of 25% or higher. Plus, interest on cash advances starts accruing immediately, with no grace period.
- ATM fees: On top of the cash advance fee, the ATM operator may charge an additional fee, which can range from $2 to $5 depending on the ATM network.
- Daily limits: Many credit card issuers set a limit on how much cash you can withdraw in a day. This is usually a small percentage of your overall credit limit. For example, if your credit limit is $5,000, your daily cash advance limit might be $500.
When is it okay to use a credit card at an ATM?
Using a credit card at an ATM should generally be avoided due to the high costs. However, there are situations where it may be the only option:
- Emergency situations: If you’re in a tight spot and need cash immediately (for instance, during travel or in an urgent financial situation), a credit card cash advance can be a quick solution. Just be mindful of the fees and try to pay it off as soon as possible.
- No other access to funds: If you don’t have access to your bank account or debit card and need cash, a credit card can be a backup. However, always explore other options first, like transferring funds from savings or borrowing from a friend or family member.
Alternatives to using a credit card at an ATM
Before deciding to use a credit card at an ATM, consider these alternatives:
- Use your debit card: The most obvious option is to use a debit card, which pulls directly from your bank account and typically doesn’t come with the same fees or high interest as a credit card cash advance.
- Transfer funds from your credit card to your bank account: Some credit card issuers allow you to transfer funds directly from your credit card to your checking account. While this still counts as a cash advance and comes with fees, it can be a more convenient option if you’re not near an ATM.
- Personal loans: If you need cash for a larger expense, a personal loan might be a better option. Loans typically have lower interest rates than credit card cash advances, and you’ll have more time to repay the loan.
- Ask your bank for an overdraft: Some banks offer overdraft protection, allowing you to withdraw more than what’s in your account for a fee. While this still comes with a cost, it’s often less expensive than a cash advance.
How to minimize the impact of using a credit card at an ATM
If you do need to use a credit card at an ATM, here are some ways to minimize the financial impact:
- Pay it off quickly: Since interest on cash advances accrues immediately, pay off the balance as soon as possible to reduce the amount of interest you’ll owe.
- Withdraw only what you need: Because of the fees involved, only take out the exact amount of cash you need to get by. Avoid taking out more than necessary, as this will only increase the amount you have to repay.
- Check your credit card terms: Before using a credit card at an ATM, review your card’s terms and conditions for cash advances. Knowing the exact fees and interest rates beforehand will help you make an informed decision.
Conclusion: use credit cards at ATMs with caution
While you can use a credit card at an ATM, it’s rarely a good idea due to the high fees and interest rates.
Cash advances can quickly become costly, so it’s best to consider other options whenever possible. However, in emergencies, knowing how to use a credit card at an ATM can provide a quick solution.
Just be sure to pay off the balance as soon as you can to minimize the financial hit.