How to Withdraw Cash from Credit Card in ATM?

Withdrawing cash from a credit card in an ATM can be a convenient and quick way to access funds, especially during emergencies. However, there are several important factors you should be aware of before proceeding.

Credit Card Withdrawal Process

A credit card cash withdrawal, also known as a cash advance, allows you to use your credit card to withdraw cash from an ATM or over the counter at a bank. Unlike normal credit card purchases, cash withdrawals entail administering immediate interest upon the withdrawal without granting a grace period. This results in the instant accumulation of interest against the amount withdrawn once cash is collected, unlike purchases that generally allow space for the accumulation of interest afterward.

It means trying your credit card in an ATM to instant cash withdrawal, like using a debit card. The sum withdrawn may then figure in the outstanding credit card balance and needs settling against other interest charges if any.

Difference Between Cash Advance and Normal Transactions

While both cash advances and normal credit card transactions involve using your credit card, there are some key differences:

1. Interest Charges
   Cash Advance: The moment you get into that transaction, interest starts to accrue, and most usually, it tends to carry much higher interest rates compared with those of ordinary purchases. Cash advance interest rates can be as much as around 3% to 5% a month depending on the credit card issuer.
   Normal Transaction: But these purchases have profit-free windows instead that usually last from 20 to 30 days before interest kicks in. As long as the entire amount spent on the purchase is paid off during this window, there'll be no interest imposed on it.
2. Fees
   Cash Advance Fees: A credit card cash advance often involves additional fees, such as cash advance fees or ATM cash withdrawal charges, which can range from 2% to 5% of the withdrawn amount.
   Normal Transaction: Regular purchases do not carry any cash advance fees.
3. Credit Limit Impact
   Cash Advance: The amount withdrawn as a cash advance usually counts towards your credit card limit. Some credit cards may even have a separate credit card cash limit, which is typically lower than your overall credit limit.
   Normal Transaction: Regular purchases use up your total credit limit but may not have a separate limit for purchases.
4. Repayment
   Cash Advance: Repayment is generally more immediate for cash advances since interest starts accruing from day one. Also, cash advances usually do not qualify for promotional offers such as interest-free installment plans.
   Normal Transaction: Most common purchases come with flexible repayment options that can entail zero-interest installments or interest-free payments over an extended period for some purchases.

Steps to Withdraw Cash from a Credit Card in an ATM

Withdrawing money from a credit card has always been easy, but there are a few precautions you must take to make the process smooth and safe. Given below are step-by-step instructions on performing an ATM withdrawal using a credit card:

1. Locate an ATM
   To withdraw cash using your credit card, you’ll need to locate an ATM that accepts credit cards. Many ATMs allow credit card cash withdrawals, but it’s advisable to use ATMs that belong to your card issuer or banking network, as they typically have lower fees.
2. Insert Your Credit Card
   After locating an ATM, insert your credit card into the machine, just like you would with a debit card. You’ll then be prompted to enter your PIN (Personal Identification Number) for security purposes.
3. Select the Cash Withdrawal Option
   Once you’ve entered your PIN, navigate to the cash withdrawal option. The ATM will ask you for the amount you want to withdraw. Note that you are limited by the credit card cash limit, so be sure to check how much you can withdraw before proceeding.
4. Choose the Account Type
   In some cases, the ATM will ask for the type of account you want to withdraw from. Select the “Credit” option to initiate the credit card to cash conversion.
5. Withdraw the Cash
   After confirming the amount, the ATM will dispense the cash. Ensure that you take your card, cash, and receipt.

How to Use an ATM for Credit Card Cash Withdrawal

The cash withdrawal procedure from ATMs using a credit card is mostly the same as cash withdrawal through debit cards. The only difference is that you're accessing credit instead of your funds. Here are the steps regarding how to withdraw cash from ATMs using a credit card:

1. Insert your credit card into the ATM.
2. Enter your PIN for security.
3. Select cash withdrawal.
4. Choose the credit option when prompted.
5. Withdraw the required amount, noting the cash limit on your credit card.

Setting Up or Retrieving Your Credit Card ATM PIN

In order to use your credit card for ATM cash withdrawals, you will need to have an active PIN. Here’s how you can either set up or retrieve your PIN:

1. Set Up a New PIN
   Log in to your credit card issuer’s website or app.
   Look for the option to set or change your ATM PIN.
   Follow the instructions to create a secure PIN.
2. Retrieve an Existing PIN
   Once you’ve forgotten or misplaced your PIN, you can have it retrieved via email, SMS, or mail by calling the customer service inflow of your credit card issuer.

Limits on Cash Withdrawal from a Credit Card

Each credit card possesses specific restrictions for cash withdrawals, generally lower than your overall credit limit. To prevent yourself from running into issues while withdrawing cash, it is crucial to understand your credit card's cash limit. These limits may differ based on the type of card you have, and your credit card issuer's policies.

1. Cash Advance Limit
   Typically, the cash advance limit is between 20% to 30% of your total credit limit. For instance, if you have a credit limit of Rs. 1,00,000, your cash advance limit could range from Rs. 20,000 to Rs. 30,000.
2. ATM Withdrawal Limit
   ATM withdrawal limits are often set by the ATM network, and they might be lower than the overall cash advance limit. Generally, you can withdraw anywhere from Rs. 10,000 to Rs. 50,000 per day, depending on your card’s limits and the ATM’s restrictions.

Fees and Charges for Credit Card Cash Withdrawals

Using your credit card for cash withdrawal is convenient, but it comes with a variety of fees and charges:

1. Cash Advance Fees:
   This is levied by credit cards when you withdraw cash using them, mostly as a percentage of the withdrawn amount and ranges from 2% to 5%. For example, you might withdraw Rs. 10,000 but incur a fee of 3%, same amounts to Rs. 300.
2. Non-Credit-related ATM Charges:
   If you visit an ATM not associated with your credit card company, you may be subject to higher cash withdrawal fees than those at your bank's ATMs.
3. Cash Advance Interest:
   Perhaps the most expensive aspect of taking cash out of your credit card is interest for cash advances: an initial 3% to 5% or higher monthly rate charged right after the withdrawal (compared with purchase rates that may or may not have a 30-day grace period).

Risks and Precautions While Withdrawing Cash from a Credit Card

While withdrawing cash from a credit card can be convenient, there are several risks and precautions to keep in mind:

1. High Interest Rates
   The interest on credit card cash advances begins accruing immediately, which can quickly add up, especially if you don’t repay the amount promptly.
2. Additional Fees
   In addition to ATM withdrawal charges and cash advance fees, there may be other hidden costs associated with withdrawing cash from your credit card.
3. Impact on Credit Score
   Frequent use of credit card cash advances may negatively impact your credit score, as it can suggest to lenders that you’re relying heavily on credit to meet your financial needs. This could make it harder to secure credit in the future.
4. Limited Withdrawal Amounts
   You are limited by both your credit card cash limit and the ATM withdrawal limits, so you may not be able to withdraw the full amount you need.
5. Repayment
   Since the interest on cash advances starts immediately, it’s crucial to repay the amount as soon as possible to avoid high-interest charges.

Conclusion

Emergency cash from credit card through an ATM is a very good way to have a cash requirement in an emergency situation. The fact that it has an almost abysmal limit, high interest rate, and also fee on cash withdrawal limits attached to one's credit card makes it necessary for you to have the knowledge before you opt for this option. Accordingly, using a cash advance in a manner which is least costly and has reduced associated risks, you should track your cash advance usage through the above steps.

Before using a credit card to convert to cash, always consider example alternatives, as this may easily become an expensive solution long-term.