If you need cash, you might feel tempted to use your credit card - but it's an expensive way of taking out cash. We looked at the fees involved and what you could do instead.
You can withdraw money from a credit card - it’s known as a cash advance. Cash advances, however, come with hefty fees and interest rates. You can withdraw at cash points, banks, and in stores via cashback, but if you need cash in a hurry, it’s best to avoid using your credit card.
How much does it cost to withdraw money from a credit card?
Fees vary depending on the provider, but it will most likely be expensive, regardless of your provider. For example, Barclaycard charges £2.99 for withdrawals under £100 and 2.99% for larger withdrawals. So, if you took out £50 cash, it would cost you £52.99. And if you took out £200, it would cost you £205.98. Some cards will have higher fees than this.
What’s more, as soon as you withdraw the cash, interest will start getting charged every day until you've paid it off. Unlike using your card in a shop or online, there's no grace period before the interest’s applied to cash advances. So you’ll be charged a higher rate of interest than the standard rate - as well as the withdrawal fee.
You might be surprised to learn that certain other credit card transactions are treated as cash advances as well, such as:
- purchasing foreign currency, including traveller’s cheques
- purchasing gift vouchers
- gambling of any kind, including lottery tickets
If you've got a credit card with a low introductory rate or a 0% rate card, you'll still get charged the card provider's standard rate of interest for cash advances. All in all, using your credit card for cash withdrawals isn't to be recommended.
Cash advances and your credit score
Using your credit card for a cash advance won't directly affect your credit score unless your credit utilisation ratio increases above the recommended level of around 30% when you use it. Cash advances also get recorded on your credit file, and if you’re planning to apply for credit in the next few months, potential lenders will see them. If you’ve got a few cash advance on your file, it could indicate that you’re struggling financially.
Alternatives to a cash advance
If you need cash and you can't wait until the next payday, there are a few alternatives you could try instead of turning to your credit card.
- Ask friends or family if they’d consider lending you some cash. They might be happy to do this for a small amount, especially if you usually have a good track record with money.
- If you’re a member of a credit union, they may be able to help you out with a loan. You could also take out a loan with your bank, but this will still come with interest, so it's not a good idea unless you manage your repayments properly.
- Those on benefits may be able to get a budgeting loan to help pay for items such as food, clothes, or travel costs. See if you’re eligible on the government’s website.
- Your local council may run welfare schemes designed to help people with short term financial difficulty. Check to see what’s available in your area - England, Northern Ireland, Scotland, and Wales.
If you’re struggling with debt, find out where you can go for help.
Disclaimer: All information and links are correct at the time of publishing.