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Transferring money from your credit card to your bank account is called a cash advance. It may sound like a quick and simple way to get money, but the fees and high interest rates may not be worth the move. Only consider this option as a last resort, and if you know you can pay back the funds quickly.
How do cash transfers from credit cards work?
When you transfer money from your credit card to your bank account, you’re essentially withdrawing the credit as cash. For example, if your credit limit is $5,000 and you transfer $1,000 to your bank account, you’ll have $4,000 of available credit on your card, and $1,000 of cash in your bank account (minus any transfer fees).
How much does it cost?
Unlike standard purchases made on your card, cash advances start accumulating interest immediately — there are no grace periods.
The cash advance rate on your credit card is typically higher than the card’s standard purchase rate. For example, the average purchase interest rate for a rewards card is roughly 21%, with an average cash advance rate of 23%, according to NerdWallet’s analysis of over 140 credit cards.
On top of the high interest rate, you may also be charged a cash advance fee for using the service. This could be a flat fee (such as $5) or a percentage of the amount you transfer (such as 1%).
How much can I transfer?
The amount of cash you can transfer depends on your cash advance limit, which is typically based on your credit limit. The cash advance limit is the amount of cash you can withdraw or transfer from your credit card at one time.
Your card may have a daily limit that could affect how much cash you can transfer. For example, if your daily limit is $2,000 and you’ve already charged $1,000 to the card, you’ll only be able to transfer $1,000 of cash. Plus, cash advance fees may reduce the available amount even more.
Will it hurt my credit score?
Using your credit card to get cash won’t have a direct impact on your credit score. However, any time you use your credit card, you increase your credit utilization ratio — this is the amount of credit you’ve borrowed in relation to the amount you have available. A high credit utilization ratio (typically anything above 30%) can have a negative impact on your credit score as it implies you rely heavily on borrowed money.
As with all credit card bills, late payments on cash advance balances can hurt your credit rating. And, since the interest accumulates instantly, you’ll want to start paying it off as soon as possible to prevent the debt from snowballing.
Nerdy tip
You may be able to pay bills with your credit card instead of cash. However, using your credit card may also incur transaction fees, so look into all your options before making this decision.
Four ways to transfer money from a credit card to a bank account
The four following methods can be used to withdraw money from your credit card. Despite their differences, they are all considered cash advances.
1. Request a transfer in person
You can ask a teller at your local bank branch to withdraw funds from your credit card and deposit them into your bank account if your credit and chequing accounts are with the same institution.
2. Withdraw the cash from an ATM and deposit it yourself
To complete the transfer in person, insert your credit card into an ATM and make a cash withdrawal. Then, deposit the money into your bank account at a local branch. Keep in mind that your card, and even the ATM, may have limits on how much money you can withdraw at one time. ATMs may also impose withdrawal fees on top of the cash advance fees your credit card charges.
3. Transfer the money online between accounts
If your credit card and bank account are with the same institution, you can likely do the transfer online or through the issuer’s app.
4. Use a credit card convenience cheque to pay with cash
Credit card convenience cheques work the same as regular cheques: you write the amount you want to spend, and the cash is withdrawn from your credit card when the cheque is processed.
Did you know?
Gambling purchases like lottery tickets are considered cash advances. This is also true of wire transfers, money orders and travellers cheques. If you can, avoid using a credit card to buy these types of items.
Pros and cons of transferring cash from a credit card to a bank account
Transferring cash from a credit card to a bank account can help you get your hands on cash quickly. But as mentioned above, the costs tend to outweigh the benefits. Weight up the pros and cons before you make a withdrawal.
Pros
- Access cash when you’ve run out of options. If you’re stuck at a cash-only vendor and your bank account is empty, you can transfer cash from your credit card to complete the purchase.
- Use an ATM without a debit card. If you don’t have your debit card and need to get cash quickly, you can use your credit card to withdraw cash from an ATM.
Cons
- High interest rates. Cash advance rates are often higher than purchase rates.
- No grace period. Unlike regular purchases, the interest on cash advances starts accumulating as soon as you withdraw the money.
- Additional fees. A cash advance fee may be applied to each withdrawal, such as 1% of the transaction amount or $5, whichever is greater.
- Potential road to debt. Cash advances can easily lead to credit card debt as the interest begins accumulating instantly. If it grows to an unmanageable amount and you fail to pay the minimum balance due, your credit score can be affected.
- No rewards. You typically don’t earn rewards on purchases made in cash.
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Alternative ways to get cash quickly
Getting a cash advance using your credit card can be handy in an emergency, but it’s not your only option. If you need a sizable amount of cash, consider a personal loan or a line of credit instead. Both of these options typically offer better rates and repayment flexibility.
Frequently asked questions
Transfers made online or via the issuer’s app may complete the same day. However, if you want to get the cash in your hands instantly, you may want to withdraw the funds from an ATM.
Some cards offer promotional 0% interest deals on cash advances for new cardholders. Additional fees may apply. After the promotional period ends, the card’s standard cash advance interest rate applies to any unpaid balances.
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