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If you don’t have any cash on you, walking by an ATM without enough money in your bank account to cover a withdrawal can be frustrating. The best credit cards, however, can be used to withdraw cash from an ATM, whether it’s your bank’s or not. Just like that, you can have some money in your pocket.

But don’t jump up on the first ATM you see and take out some cash with your credit card just yet. Called cash advances, these withdrawals are actually you borrowing cash on your credit card and you must repay them — usually with high fees and interest rates.

Table of contents:

  • How to get a cash advance from a credit card
  • Is a cash advance bad for your credit?
  • How to avoid some cash advance fees

How to get a cash advance from a credit card

You first need to check that your credit card will work in an ATM. You can do this by either calling your credit card company or checking the cardholder agreement that came with your card. Look for the sections on “Cash Advance APR” and “Cash Advance Fee,” which are listed with dollar figures or percentages charged and are a sign that you can use your card at an ATM.

Your credit card statement may list a cash advance credit line or cash advance credit limit, which is the maximum amount of cash you can take out. The credit limit for cash advances is usually smaller than your credit limit for regular purchases.

To use your credit card at an ATM, you’ll need to find or set the PIN that’s tied to your credit card. You may have gotten it when the card came in the mail. Otherwise, you may have to request it from the credit card issuer by logging in to your account online or calling the phone number on the card for the bank. It might take seven to 10 days to set up the PIN.

You may get charged a fee for using an ATM that is outside the network linked to the credit card. Check with your credit card provider or your bank to find out how much it is and if you can avoid it.

Is a cash advance bad for your credit?

Short-term problems of cash advances

Fees are the first thing you’ll pay on a cash advance. They’re usually based on the amount of cash you borrow, such as $10 or 5% of the amount, whichever is greater. That equates to a $10 fee for borrowing up to $200, or 5% of the amount borrowed if it’s more than $200.

Immediate interest charges are another reason to avoid cash advances. They don’t have grace periods — as your normal credit card purchases do for about a month — and the credit card company will start charging you interest on a cash advance as soon as you borrow the cash.

Cash advances have high annual percentage rates (APRs) that are much higher than normal purchases. Expect to pay 25% interest on a cash advance, again, without a grace period.

Long-term problems of cash advances

High-interest rates can turn into long-term problems if you don’t pay off the cash advance soon, but there are other problems with cash advances that can follow you for years. First, your credit card company may flag you as a risky borrower. Creditors consider people who use cash advances as being desperate for money, especially if they do a few of them.

Such risky behavior with your money can lead to your being unable to get higher lines of credit or good terms with the bank that gave you the cash advance. Your credit card’s interest rate could rise, or your account could be closed.

Second, cash advances add to your credit card debt and appear on your credit reports. If you already have high balances on your credit cards when compared to your total available credit, a cash advance may lower it further.

The more credit card debt you have compared to your total available credit — called credit utilization — the more it can hurt your credit score. If you already have high balances on your credit cards, a cash advance can raise your credit utilization rate and flag you as a bigger risk to creditors. The higher the credit utilization rate, the greater the risk that you’ll default on a credit account within the next two years, according to FICO, a credit scoring company. “Amounts owed” make up 30% of a credit score, and using more than 20% of the credit available to you is considered risky.

How to avoid some cash advance fees

Interest charges on cash advances are unavoidable. However, you can eliminate some fees using a few options.

If you have a credit card from Discover, it allows up to $120 to be borrowed in cash at checkout when you’re buying something. It categorizes the money as a purchase instead of a cash advance, so you’ll avoid bank and transaction fees.

Your regular APR applies to the cash you get and there are no hidden fees, according to Discover. Called “cash over,” Discover limits the transactions to $120 every 24 hours with no monthly limit, but your local store may allow less money to be cashed out over the purchase amount and may limit the number of times you can withdraw cash.

When withdrawing cash from your checking account, if you can’t find an ATM linked to your bank so you can avoid ATM fees, find a bank that covers ATM fees at other banks. Some brokerage accounts offer free ATM use for customers, so setting up a brokerage account may be worthwhile.

If you’re really strapped for money, consider a balance transfer credit card. It allows you to transfer a credit card balance and then pay it off without any interest charges for a year or more.

However, there are drawbacks to these cards, and fewer credit card companies offer them. Be aware of the terms and fees before switching to one.

If you decide to get a cash advance through your credit card, try to pay it back as soon as you can. Interest will start accruing immediately, and having debt get out of control will only add to your cash flow problems.

Disclaimer: This story was originally published on July 20, 2020, on BetterCreditBlog.org. For more information on credit card cash advances, please consult your own credit card company's terms and rates.