If you are confused about using a credit card at an Atm, and you may be asking this question. So yes! Most credit cards allow you to withdraw cash from any atm near you, just like using a debit card, but the cash withdrawal charge shows up on a credit card instead of from a bank account. This may now seem a very simple transaction, but it comes with many drawbacks and very high fees. The process in which credit card is used at atm is called CASH ADVANCE.
When the credit card is used in an Atm, the Atm connects your credit card to the bank from where you have issued your credit card, and when you ask for cash, it first checks your cash advance limit and what you ask is less than cash limit, so it approves the application, and the ATM withdraws the money.
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What Is a Cash Advance?
It is a short-term loan in which your credit card is used to withdraw cash from atm. In this process, the cardholder is basically purchasing cash from a credit card company against the buying of an item from the store. This withdrawal of cash from atm will be added to the account balance and will be shown in the monthly income statement.
Cash advances generally come with very high fees. It often comes along with one-time fees and a high interest rate. Cash advance average APR ( annual percentage rate) ranges from 20% to 25%; this percentage is much higher than APRS for normal purchases. Normally cash advance doesn’t have any grace period, so you start earning interest cost right after the transaction. For all of these drawbacks, a cash advance should only be used in emergency situations or as a last resort.
Of course, a cash advance comes with a limitation on how much cash you can withdraw from it. You can know your card limit in your card’s terms along with other credit details. The best option for you is to only use your debit card at atm and not any other cards.
Steps to Using a Credit Card at ATM
If you want to make money from ATM through a credit card, here are some steps to do so:
- First, enter your credit card at Atm.
- Now enter your credit card pin.
- Choose the cash withdrawal or cash advance option
- Now between the option of debit or credit, select credit.
- Enter the amount that you want to withdraw.
- Now accept any fees like cash advance fees and atm transaction fees.
- Process complete now, take out cash.
How Much Cash Can You Withdraw From ATM Through a Credit Card?
If you are using a debit card to withdraw your money, you can withdraw up to the last available amount in your account. For example, you have Rs. 2,100 in your account, you can withdraw Rs. 2,100 from atm.
And if you are using a credit card to withdraw cash, you can withdraw up to 90% of your credit limit. For example, your credit limit is Rs. 30,000, so you can withdraw Rs. 27,000.
Things to Consider for Using a Credit Card at An ATM
High Transaction Fees
In cash advance, to have to pay the fee on the amount that you have to borrow. On the credit card, the term says that 5% of the amount you have borrowed. For example, you will be charged 5% of the amount you borrow if the amount is large.
No Grace Period
In cash advance, the credit card company starts charging you interest immediately after you borrow money, so the charges add up very quickly. Interest accrues from the day the withdrawal of cash advance is made.
On cash advances, the interest rate is usually higher than normal purchases. Bank generally charges around 2.5% to 3.5% Interest rate per month, and there is no grace period which means you will start getting charges just after your transaction.
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One Time Fees
Every time you use a credit card at atm, the company will charge you a one-time fee that can be 3% to 5%, but the exact fee will be mentioned in your card’s terms and conditions. So it is very important to read the card term and conditions very carefully before you make any cash advance. The atm fees plus cash advance fees end up becoming the expensive method of cash withdrawal.
Flagged as a Risky Borrower
You might get flagged as a risky borrower if your credit card company saw that you used cash advance by their risk models. The reason behind it is that they know people who are really in need of money will use a cash advance. So this means if they see you as risky, then you might not get higher lines of credit, or you might not have good terms with the bank in the future.
Effects on Credit Scores
Cash advance balance adds to your credits card debts. Usually, the lower your credit cards score will be, the higher your credit card debt is. If your balance is high on your credit card as compared to your credit card limits, then there will be a negative impact on your credit score.
Frequently Asked Questions About Using Credit Cards at an ATM
• Can we withdraw cash from an atm through a credit card?
Yes, you can withdraw cash from an atm through your credit card.
• What interest rate and fees are involved?
The interest rate is 2.5% to 3.5% per month, and Atm fees are also there if you use a credit card at an atm. So it is very important to first know about all the fees associated with it.
• What is my cash advance limit?
Most cards have separate cash advance limits, so if you want to know yours, read your card terms and condition or call your card issuer company to know your cash advance limit.
• How can I get cash off from a credit card without paying the fees?
If you want to get cash off from a credit card without paying the fees so instead of a credit card, use a debit card to withdraw cash from an Atm, or you can visit the bank branch and gets off your Money through a check.
• Does cash advance default on your credit card debt?
Yes, people who take out cash advances are more likely to default on credit card debts as compare to people who don’t. That is one of the reasons why the interest rate is higher in Cash advances. It can also increase the risk of falling behind on your credit card payment.
Cash Advance Alternatives
Before taking out a cash advance,, consider this alternative.
Instead of using a credit card at the atm, use a debit card to withdraw your money. In this way, you will not have to pay any interest rate fees and atm fees for withdrawing cash.
You can borrow money from your family member or friend as it will save you from cash advance high fees.
You can use your credit card to make purchases instead of getting cash advances, which will cost you high fees and interest.
Using a credit card at atm is a short-term fix when you are short on money, but the amount of interest rate and other fees make it a very expensive way to get off money. It should always be considered as a last resort as many other options are available to get fast cash, plus they are very less expensive than a cash advance. The interest rate of cash advance is much higher than regular purchase plus usually, many credit card companies do not provide a grace period, which means interest will start to charges just after your transaction. So before using a credit card at atm, try using a debit card as there are no fees in withdrawing cash from it.