Getting cash from your credit card can be a helpful tool in emergencies, but it's crucial to understand the implications before you take the plunge. This guide offers helpful suggestions, highlighting both the benefits and drawbacks, to ensure you make informed decisions.
Understanding Your Options: How to Access Cash
There are several ways to get cash from your credit card, each with its own set of fees and interest rates:
1. Cash Advances:
This is the most direct method. You can withdraw cash directly from an ATM using your credit card or request a cash advance at the bank or credit union where your credit card was issued. However, be warned: cash advances typically come with high fees and high interest rates, often significantly higher than your card's standard APR. These fees and interest charges start accruing immediately, unlike purchases where you usually have a grace period.
Key Considerations:
- High Fees: Expect to pay a significant percentage of the amount withdrawn (often 3-5%) plus a fixed fee.
- High Interest Rates: The interest rate on cash advances is almost always higher than the interest rate on purchases.
- No Grace Period: Interest starts accruing immediately.
2. Balance Transfers:
While not directly a cash withdrawal, balance transfers can indirectly provide cash. If you have high-interest debt on another card, transferring it to a card with a 0% APR introductory period allows you to pay it down without accruing further interest. You can then use the freed-up funds from your reduced debt payments as needed.
Key Considerations:
- Balance Transfer Fees: Some cards charge a fee for balance transfers (often 3-5%).
- Introductory Period: The 0% APR period is temporary; after it expires, the interest rate will jump, often quite high. Make sure you can pay off the balance before this happens.
- Credit Score Impact: Applying for a new card or transferring a balance can temporarily lower your credit score.
3. Check Cashing:
Some credit cards allow you to receive a check in lieu of a cash advance. While functionally similar to a cash advance, it can feel less like "borrowing money." This offers the exact same terms and fees as a cash advance and should be treated as such.
Key Considerations:
- Same High Fees and Interest: This method usually includes the same high fees and interest rates as a direct cash advance.
When is Getting Cash from a Credit Card Acceptable?
While it's generally best to avoid cash advances due to the high costs, there are rare exceptions:
- True Emergencies: If you face an unforeseen emergency, such as a major car repair or medical bill, a cash advance might be a last resort. However, create a repayment plan immediately to minimize long-term costs.
- Short-Term Needs with Swift Repayment: If you know you can repay the full amount quickly, the high fees might be manageable. However, this is risky and should only be considered in a genuine emergency.
Strategies to Minimize Costs
If you absolutely must get cash from your credit card, consider these strategies:
- Compare Fees and Interest Rates: Different cards have different fees and interest rates for cash advances. Shop around before taking action.
- Borrow from a Friend or Family Member: Before considering a cash advance, explore borrowing from friends or family members – it can often be a cheaper and less stressful option.
- Seek Professional Financial Advice: If you're struggling financially, seek help from a financial advisor or credit counselor. They can help you develop a repayment strategy and avoid falling into a cycle of debt.
Disclaimer: This information is for guidance only and does not constitute financial advice. Always consult with a financial professional before making significant financial decisions.
