By Matt Fernell, Editor-in-Chief at Finance.co.uk. Last updated 8th November 2023.
It’s possible to withdraw cash from an ATM using a credit card, but it could cost you dearly.
Credit card providers typically charge high fees for withdrawing cash from an ATM; therefore, using your debit card to withdraw money is better if you have available funds in your current account.
Withdrawing cash with your credit card also leaves a record of the withdrawal on your credit report, which some lenders may view as irresponsible financial management, making it harder for you to secure credit in the future.
Credit cards work in a similar way to debit cards; therefore, they can be used in the same way at places that accept debit cards.
You can withdraw cash from a credit card
Using an ATM
In a bank branch (if your credit card provider has one)
As cashback when using it to purchase goods from a shop
Other transactions that will be treated as cash withdrawals using a credit card include the following:
Transferring money to your current account
Buying travel money, including traveller's cheques
Purchasing gift vouchers or topping up a prepaid card
Paying utility bills or your mortgage
Gambling
Therefore it’s essential to consider how you use your credit card to ensure you’re not being charged a fee or using it in ways that might negatively impact your credit score.
How much cash you’ll be able to withdraw from your credit card will depend on:
Your available credit - All credit cards come with a personal credit limit. Your available credit is the difference between how much you’ve borrowed on the card and your credit limit.
ATM limits - Most ATMs (or cash machines) will have their limits on how much you can withdraw in a single transaction.
Your cash advance limit - Some credit card providers will set a limit on what percentage of your credit limit you can take as a cash advance.
Remember, no matter your credit limit; it’s a good idea not to max it out.
Your credit usage will appear on your credit report, and using a large portion or all of your credit limit can make it seem like you’re desperate for money. Maxing out credit cards could harm your chances of being accepted for other credit products in the future. Stay within 25% of your credit limit to keep your credit score healthy and ensure you can afford to repay what you owe.
Credit card cash advances are notoriously expensive, and most credit card providers will charge you two separate fees when you make a cash withdrawal on your credit card.
Most credit card companies will charge you a cash advance fee whenever you withdraw cash from your credit card. This can either be a percentage of the transaction or a fixed fee and will be charged every time you make a transaction, so if you must take a cash advance, try and avoid taking multiple small withdrawals.
When you take a cash advance, your credit card company will start charging you daily interest on the amount you’ve withdrawn until you’ve paid off the balance.
The daily interest rate for cash withdrawals can be higher than the agreed APR for your credit card, making cash advances one of the more expensive forms of credit available.
Credit cards usually offer a grace period for regular purchases, generally around 28 days. If you pay off the balance during this time, you won't have to pay any interest. However, this grace period doesn't apply to cash advances. If you take out cash using your credit card, interest will start accumulating immediately from the day of the transaction.
It’s a good idea to avoid withdrawing cash from your credit card if you can.
Cash advances are one of the most expensive ways to borrow money and can damage your chances of being accepted for credit products in the future.
Making a cash advance on your credit card will leave a record on your credit report, which will be visible to lenders and other credit card providers.
Withdrawing cash from a credit card can appear to lenders like you’re in financial trouble, putting them off lending to you.
Using a large portion or all of your credit card limit can also make lenders believe you’re a high risk to lend to, so try and stick within 25% of your credit card limit.
Whilst these things may not immediately impact your credit score, they are visible on your credit report. They can put lenders off when you apply for a loan, mortgage or another credit card, so if you can, avoid cash advances using a credit card.
There’s no way to avoid paying fees for cash advances on credit cards other than changing how you use your credit card so that you’re not taking cash advances and only using them for purchases.
Here are some alternative options that are worth exploring:
0% money transfer credit card - Money transfer credit cards allow you to move money into your current account without the huge fees you’d get from cash advances on credit cards. Whilst you’ll have to pay a money transfer fee, as long as you keep up with your minimum payments, you won’t need to pay any interest on the money you transfer.
Arranged overdraft - Overdrafts are a way of borrowing money through your current account. While overdrafts can still be expensive, arranged overdrafts can be cheaper than a credit card cash advance for short-term borrowing.
The information provided does not constitute financial advice, it’s always important to do your own research to ensure a financial product is right for your circumstances. If you’re unsure you should contact an independent financial advisor.
