Breaking Bad Credit Habits: #1 Using Your Credit Card Like an ATM

Many people use their credit cards to make purchases online or in-store, but these cards may also give cardholders access to cash from their credit card account.

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While the option to take a cash advance is convenient in an emergency, it’s also can become a bad habit.

If you become too comfortable using your credit card like an ATM and withdraw cash on a regular basis, you could soon find your convenient cash withdrawals costing you a lot more than expected due to fees and interest.

Using Your Credit Card for Cash Advances

Credit card holders may get access to cash in one of four ways:

  1. withdrawing cash from an ATM using your credit card
  2. withdrawing cash from your credit card account at a bank
  3. transferring money online from a credit card account to a checking account
  4. using cash checks

With some credit card companies, using your credit card to purchase items that are easily transferred to cash also count as cash access and incur the same fees or interest. These may include things like lottery tickets, money orders, casino chips or foreign currency.

While cash access from your credit card could help you get out of an emergency situation, repeatedly using your credit card for cash access could become a bad habit with long-term financial repercussions.

Don’t Make a Habit of Using Your Credit Card to Access Cash

Your credit card account is not your checking account. When you get cash from your credit account, you pay for “borrowing” it. If you aren’t careful, you could soon find yourself facing hefty charges for the convenience of credit card cash access.

Additional costs you may face include:

  • cash advance transaction fees, which could be a percentage or a flat rate fee
  • a higher interest rate on cash access than you typically pay on regular credit card purchases
  • additional interest, because interest starts accruing immediately on cash advances
  • additional ATM fees that may be charged for a credit card cash advance

How to Break the Credit Card Cash Advance Habit

If you’ve fallen into the habit of using your credit card to access cash, it may be time to stop.

Start by taking a look at your credit card statements for the past several months to total how much your cash withdrawals have cost in interest, fees and other charges.

Could you have used that money to pay down other debt? Are there other ways you could have covered the expense? Find your motivation for changing your cash advance habit and then take the steps to help avoid falling into your old pattern.

Make a budget that includes a cash spending amount that you withdraw from your bank account at the beginning of each week. Once the cash has been spent, that’s it — try not to use your credit card to make a withdrawal unless it’s an emergency.

Also attempt to stay away from situations that might make it easy to forget your commitment to break your bad credit habit. If Friday after-work drinks used to cause a quick credit card cash advance, either work the outing into your weekly budget or stop going.

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There may be times when using your credit card to access cash is the only option — such as for “cash only” car repairs, or school events or emergency expenses. However, depending on your credit card for cash withdrawals can be an expensive and bad credit habit that could ultimately cost you more than you anticipated.

Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.

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