How to Cash Out a Credit Card Balance

Cashing out a credit card balance, also known as a credit card cash advance, is one way to obtain cash that would otherwise be unavailable. Consumers, on the other hand, should be extremely cautious of this process. Credit card cash advances are among the most costly financial products available, and the cost of the cash advance can compound over time. If you’re thinking about getting a cash advance, you’ll need to know not only how to get one, but also how to weigh the drawbacks and alternatives to cash advances.

Part 1 Getting the Cash from the Credit Card Company

1. Check to see if you’re up to date on your payments. While most credit cards allow cash advances, it is not the same as using a credit card. Whereas you may be able to use a credit card even if you are a few days late on your payments, this is not usually the case with a cash advance.

You can’t usually withdraw the entire amount of your credit limit, so make sure you’re not maxed out before you try to make a withdrawal.

If you use online banking, you should be able to quickly access this information by logging in to your account.

2. Contact your creditor. If you do not use online banking and are unsure whether you are current on payments or how much credit you have remaining on your card, contact the creditor who issued the card. They will be able to answer any questions you may have regarding your credit limit or payment history.

Don’t forget to inquire about any fees or special interest rates associated with cash advances.

3. Locate or create your PIN. Remember that your credit card has a different PIN than your debit card before going to the ATM. You’ll need to obtain your credit card’s PIN before going to the ATM, as it’s common for an ATM to freeze an account after a certain number of incorrect entries.

You may be able to reset your PIN if you can’t remember it. Call your bank and ask how you can change it. It’s sometimes as simple as dialling a 1-800 number, but other banks may send you a new PIN in the mail.

4. Locate a free and convenient ATM. Although a cash advance can be obtained from a bank or in the form of a check mailed to you, the speed and convenience of an ATM withdrawal is part of the appeal. Find an ATM from the same bank that issued the card; using it is free. If you are unable to locate an ATM from the issuing bank, try an Allpoint ATM. Allpoint is a surcharge-free ATM network with over 50,000 locations.

Unfortunately, not everyone is connected to the Allpoint network. Check to see if you are there.

Part 2 Deciding if a Cash Advance is Wise

1. Don’t forget to factor in the cash advance fee. Although there are a few cards that charge nominal cash advance fees, they are usually significant. A cash advance fee is typically expressed as a percentage of the transaction—10% is typical—but with a minimum dollar amount.

So, if you withdraw $500 in cash, you will be charged a $50 cash advance fee because 10% of $500 is $50. Even if you only withdrew $10, the minimum dollar amount for a charge could be $5, making the charge for the $10 withdrawal $5 rather than $1.

2. Examine the interest rate. Cash advance interest rates are almost always higher than the interest rates on a typical credit transaction. Before making a cash withdrawal, make sure you understand the interest rate and can afford it.

It is not uncommon to see interest rates of 20% or higher on cash advances, which is exceptional. A high interest rate has financially ensnared many a prudent person. Before you make the withdrawal, make sure you’ll be able to easily repay the cash advance.

3. Determine whether you can begin paying right away. Unlike most credit card transactions, cash advances begin accruing interest immediately. While it is always important to pay off your credit card balance as soon as possible, this is especially true for cash advances.

Before you can make a payment toward your cash advance, you must first make the minimum payment on your regular credit card balance. Any additional payments will then be applied to the balance with the highest interest rate on your card. So, if the interest rate on your regular credit card balance is 4% and the interest rate on your cash advance is 20%, your payment must be applied to the cash advance balance.

4. Consider your options. Many people will have other options besides a credit card cash advance—the only type of loan that is more unfriendly to the borrower than a cash advance is a payday loan. Before you get a cash advance, you should think about the following:

Obtaining a personal loan It will take slightly longer than a credit card cash advance, but the interest rate will be significantly lower (by as much as half). Furthermore, a personal loan for a larger amount is usually available. Personal loans can be obtained from banks and credit unions.

I’m applying for a home equity loan. A Home Equity Line of Credit (HELOC) is a line of credit in the same amount as your home’s equity. It functions similarly to a second mortgage, but you are not obligated for the entire equity in your home, and it has an expiration date. They will take much longer to apply for than a cash advance, but they will be much cheaper. ref></ref> The interest paid on a HELOC is tax deductible.

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