Here's What Happens When You Withdraw Cash With a Credit Card

Hitting the ATM for cash and using a credit card is called a cash advance. It's one of those money moves that looks harmless on the surface, but ends up costing you an arm and a leg.

Some people do this by accident. Others do it because they need emergency cash.

In any case, here's what happens when you withdraw cash with a credit card.

Cash advances come with a much higher APR

When you swipe your credit card for groceries or gas, you're usually paying a standard purchase APR.

But cash advances live in a totally different lane. Most cards charge a much higher APR on cash advances than on regular purchases. It's not unusual to see rates north of 25% -- sometimes even higher -- regardless of your credit score.

That higher rate applies only to the cash portion of your balance, but it can hurt a lot. Especially if you don't pay it off right away.

This is one of the big reasons cash advances are treated as a last resort. They're priced like riskier debt because, frankly, they are.

There's no grace period -- interest starts immediately

With normal purchases, you get a grace period to pay your owed balance. You can pay your statement balance by the due date and avoid interest entirely.

Cash advances don't work that way. Interest starts accruing the moment you take the cash. Not the next billing cycle. Not the due date. Immediately.

Even if you pay it back a few days later, you'll still owe interest for every single day that balance existed. That's why even "small" cash advances can cost more than expected.

One way to avoid this entirely is using a card that gives you flexibility upfront -- like a 0% intro APR on purchases or balance transfers. Compare today's best 0% intro APR credit cards, some offering up to 21 months of breathing room.

Fees hit immediately, too

On top of the higher APR, cash advances come with upfront fees.

Most credit cards charge a cash advance fee of 3% to 5% of the amount, or a flat fee (eg. $10), whichever is higher.

So if you pull out $400, you might get an instant $20 fee.

And if you're using an ATM, tack on potential ATM fees too. One from the ATM operator, and another potentially from your card issuer. Triple ouch!

You can't access your full credit limit

Cash advances usually have a separate, lower limit than your overall credit line.

For example, you might have a $10,000 credit limit but only a $2,000 cash advance limit. Sometimes it's even less.

That cap exists to reduce risk for the issuer, but it also means you can't rely on a cash advance the way you might expect in a pinch.

It can impact your credit score if it lingers

A cash advance itself doesn't automatically hurt your credit score. But what happens after can.

Cash advances increase your balance and your credit utilization, which is how much of your available credit you're using. High utilization can drag down your score, especially if it stays elevated.

Smarter alternatives to consider if you need quick cash

Before you head to the ATM, it's worth pausing and checking your other options. Withdrawing cash from your credit card truly is a last resort.

Here are a few paths that are usually less painful:

• First, use any emergency funds or savings you can to avoid taking on debt.
• Get a small personal loan with a lower, fixed rate
• Borrow cash from friends or family if possible. Just be sure to tell them your payback plans, and commit to paying them back.
• Ask your card issuer or bank about short-term hardship options.

Withdrawing cash from a credit card works, but it's one of the most expensive ways to get money quickly.

If you're already leaning on credit, a 0% intro APR window can buy breathing room without immediate interest. See our best cards with 0% intro APR offers available right now.