Debit cards have become so well known that we are used to entering PIN codes and asking for cash back at the grocery store. Can you get your cash back using a credit card?
Credit cards do not offer the same flexibility. For example, you can’t request a cashback when you buy a credit card at a grocery store or pharmacy. However, you can get cash from your credit card at the bank checkout or ATM. You just have to pay for the privilege.
Using a credit card to get rewards for cash back
A cash back credit card is a type of credit card reward. In general, you will receive a cash back or points each time you make certain purchases. You may be able to exchange your rewards for a credit statement, check or cash transfer to a linked bank account.
Earning rewards in the form of a cash refund can be a good alternative to mileage or point credit cards, which often involve more complex reward structures or loyalty programs for airlines or hotels. The simplicity of knowing the exact amount of cash you earn, compared to having to determine when and how to redeem travel rewards, can make cash back cards suitable for some people.
There is also a wide range of credit cards with a cash back function tailored to the needs of different people.
What is the cash advance?
A cash advance is a short-term loan that uses a credit card to withdraw cash.
You can get an advance payment at most ATMs or at a financial institution.
Cash advances are treated differently from a typical credit card transaction. Most charge a fee in advance, which is a percentage of the total amount of cash requested, with a minimum fee if your withdrawal is small enough.
Cash advances usually have significantly higher interest rates than regular purchases and usually do not have grace periods, so you start to accrue interest right away.
Of course, there is a limit on the amount you can withdraw with an advance. You should be able to find it on the terms of the card along with other details of the credit limit.
Example cash withdrawal scenario
Let’s do the math for the hypothetical cash advance.
Here are the assumptions for this example:
- you pay an advance on the first day of the billing cycle
- The APRC for your card is 24.99% (this is the typical APRC for Cash Advance)
- the portion of the cash advance in the contract with the cardholder says “either $ 10 or 5% of the amount of each cash advance, whichever is greater.”
- you have a 30-day billing cycle
- the credit card issuer charges interest on cash advances every day
- So on the first day of the billing cycle, you pay 1000 USD at an ATM using your card.
- You will immediately be deducted with this cash advance. Since 5% of $ 1,000 is $ 50, and it’s more than $ 10, you immediately owe $ 1050. You may have to pay an ATM fee if the ATM is not on your bank’s network by adding a few bucks to the amount due.