If you are someone who travels a lot or needs to make emergency cash withdrawals, your credit card can be your best friend. In fact, you can use your credit card to withdraw cash from ATMs, just like you would with a debit card. But here’s the catch: you may have to pay cash withdrawal fees. These fees can be quite high and can quickly add up, resulting in a hefty bill at the end of the month. But, the good news is that there are a few ways to use your credit card for cash withdrawals without paying any fees.
Understand Your Credit Card Cash Withdrawal Charges
Before getting into the details of how to use your credit card for cash withdrawals without fees, it’s important to understand the charges associated with it. Credit cards come with a variety of fees and charges for cash withdrawals, which can vary based on the bank and the type of card you’re using. Typically, credit card cash advance fees are calculated as a percentage of the cash withdrawal amount, with a minimum fee as well.
The cash advance fee can be anywhere from 2% to 5% of the total withdrawal amount with a minimum charge of $5 or $10 per withdrawal. Some credit cards also incur additional charges like interest, foreign transaction fees, and ATM fees, for using your credit card at an ATM outside your bank’s network. Also, keep in mind that interest rates on cash advances are significantly higher than those on purchases, which will add to the cost if you do not pay the cash withdrawal off immediately.
How to Use Your Credit Card for Cash Withdrawals Without Fees
Now that you have a fair idea about credit card cash withdrawal charges, here are some ways to avoid them:
1. Use Credit Unions or Online Banks
Credit unions and online banks are great places to start if you want to avoid cash withdrawal fees. These institutions do not have a large network of ATMs, but they have partnered with other banks and ATM networks to provide their customers with free cash withdrawals. Credit unions also often have lower or no cash advance fees, which can save you money in the long run.
2. Choose the Right Credit Card
Select a credit card wisely so you can avoid paying hefty cash advance fees. Some credit cards are designed specifically for travelers and offer no foreign transaction fees, so you won’t have to pay ATM fees as well. Other cards may have partnerships with ATM networks, which means that you can make free cash withdrawals at specific ATMs.
3. Link Your Credit Card to Your Bank Account
Most major banks have now enabled this feature with debit cards, however, a few credit card providers also offer such services. Linking your credit card to your bank account usually allows you to withdraw cash from your credit card without incurring a cash advance fee. However, a minor transaction fee may still be applicable.
4. Use a Cash Back Credit Card
Some credit cards offer cashback rewards for purchases, and these rewards can also be used for cash withdrawals. You can use your cashback rewards to offset your cash advance fees or other charges. Keep in mind that you must pay your credit card balance in full each month or else the interest charges on the cash advances will negate any cashback rewards.
5. Opt for a Credit Card with Low or No Cash Advance Fees
Some credit cards have low or no cash advance fees. For example, Capital One credit cards have no cash advance fees at all, while others may charge a lower fee. Look for these options when selecting a credit card for cash withdrawals.
6. Ask for Overdraft Protection
Overdraft protection is a service provided by most banks and financial institutions. It allows your bank account to withdraw funds from your credit card if you have insufficient funds. The service usually involves a small transaction fee, but it can still help you avoid the high cash advance or ATM fees. However, it’s important to note that this service should not be used as a regular form of cash withdrawal.
Using your credit card for cash withdrawals can be expensive, but the above-mentioned ways can help you avoid fees or lower the costs. It is always a good practice to avoid cash withdrawals from your credit card unless it is an emergency, as it can lead to a high interest rate and affect your credit score. If possible, try to use your credit card for purchases only, and pay your balance in full each month, to avoid accruing unnecessary interest or fees. By following these tips, you can make the most out of your credit card without running into any financial trouble.