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Should you avoid withdrawing cash with your credit card?

Using your credit card to withdraw cash isn't an optimal scenario and where it’s possible to use another method of withdrawing cash, it’s usually advisable. Not only is it extremely expensive to withdraw cash on a credit card, but it leaves a mark on your credit record which could impact any credit applications you make in the future. 

This is because withdrawing cash with your credit card can lead lenders to assume that you need to use your credit card because you don't have cash in your bank account. And even though your credit report is not the only factor that determines your eligibility for credit, it doesn't help in making your look more creditworthy.

If you do need to withdraw cash using your credit card, here are all the things to consider before you head to the ATM.

How much does it cost to withdraw cash from your credit card?

There are many similarities in how you can use a debit and credit card, however the cost of withdrawing cash is one key difference. Withdrawing cash from your credit card is an expensive way to borrow money. Each time you make a cash withdrawal from your credit card, there are two charges you'll face:

• Daily interest: You will be charged interest on the amount you withdraw from the day you take it out until you pay off the balance. The interest rate for cash withdrawals is often higher than the interest rate on purchases, so ensure you are aware of the cost.

• Cash advance fee: This is usually a percentage of the amount you withdraw, or a fixed fee, depending on the amount of money you withdraw. A cash advance fee is charged every time you withdraw money on a credit card, so try to avoid multiple withdrawals.

For example, a credit card may charge 3% or £10, whichever is higher. In this case, a £100 withdrawal would cost you £10, and a £1,000 withdrawal would cost you £30.

These charges differ from standard credit card purchases, which can give you up to a 28-day grace period before you start paying interest. Read more about how to understand credit card charges.

How much cash can you withdraw with your credit card?

When you withdraw cash from a credit card it is known as a cash advance. The amount of cash you can withdraw will depend on a few factors. These include:

• Your total credit limit: This is the maximum amount you can borrow on your credit card. You can find this on your credit card statement.

• How much of your limit you have left to use: The amount you have left to spend on your credit card can affect the amount you can withdraw from your credit card.

• Your credit card's cash advance limit: Most providers set a maximum percentage of your credit limit that you can withdraw from, like 90%.

Ask your credit card provider what the cash advance limit is on your credit card, and what the charges are before making a cash withdrawal.

Where can you withdraw cash using your credit card?

You can get cash out on most credit cards in the following ways:

• Using a cash machine

• At your provider's branch with ID, e.g. passport

• Cashback when you pay with your card in a shop

What is classed as withdrawing cash?

There are also card transactions which are treated as cash advances, even though you don't withdraw any physical cash. These include:

• Making a mortgage payment

• Paying a utility bill

• Buying travel money and travellers' cheques

• Buying gift vouchers

• Betting or gambling (including lottery tickets and most transactions in a casino)

Does withdrawing cash on a credit card affect your credit score?

A cash advance will be recorded on your credit report, so lenders will be able to see that you have withdrawn cash with your credit card for up to six years. There is no guarantee that this will affect your credit score alone, however lenders will view it alongside the rest of your credit history to determine whether you are a reliable lender or not.