Why You Should Never Withdraw Cash From A Credit Card

There are a few reasons why you might be tempted to withdraw cash from your credit card as opposed to using a debit card. Perhaps you’re in a financial bind, don’t have enough money in your bank account, and need quick access to cash. Or maybe you feel safer withdrawing cash from a credit card, which has better insurance than a debit card.

Whatever the reason, it’s important to understand the potential consequences associated with this method of cash withdrawal.

4 reasons why you shouldn’t withdraw cash from a credit card

1. You’ll pay high fees

One of the biggest drawbacks of withdrawing cash from your credit card is that you’ll typically have to pay high fees. For example, many cards charge a cash advance fee of 3% or 5%. So if you withdrew $1,000 from your credit card, you could be on the hook for $30 to $50 in fees.

Additionally, most credit cards charge a higher interest rate on cash advances than they do on regular purchases. So not only will you have to pay fees upfront, but you’ll also be accruing interest on that cash advance from the moment you withdraw it.

2. It can hurt your credit score

Whenever you apply for a new line of credit, whether it’s a credit card, a loan, or a mortgage, your lender will pull your credit report and take a look at your credit score. This is known as a hard inquiry, and it can temporarily lower your credit score by a few points.

If you have a lot of hard inquiries on your credit report, it can signal to lenders that you’re desperate for cash and are possibly taking on too much debt. As a result, they may be less likely to approve you for new lines of credit in the future.

3. You may be tempted to overspend

Another downside of withdrawing cash from your credit card is that it can make it easy to overspend. When you have cash in hand, it’s much easier to impulsively buy things you don’t need. And if you’re already struggling to pay off your credit card debt, withdrawing cash can put you even further behind.

4. It can be a sign of financial trouble

If you’re regularly withdrawing cash from your credit card, it may be a sign that you’re in financial trouble. Perhaps you’re using cash advances to pay for essential expenses like rent or groceries. Or maybe you’re using them to cover debts that you can’t afford to pay with your regular income.

Whatever the reason, withdrawing cash from your credit card is not a sustainable or healthy way to manage your finances. If you’re struggling to make ends meet, it’s important to seek out professional help so you can get back on track.

Conclusion

Financial hardship is usually the reason why people resort to withdrawing cash from their credit cards, so advising you not to do it is like telling you not to scratch an itch. Just try to avoid doing it wherever possible; if anything, try to use the credit card to pay for things as opposed to simply withdrawing cash from it.

Or, if you know you might be in a bind in the future, consider applying for a credit card that offers 0% APR on cash advances. This can help you avoid paying interest on your cash advance for a certain period of time.