The physical process of withdrawing cash with a credit card is much the same as withdrawing it using a debit card.
Whereas a debit card will take funds from your bank account, a credit card will take them from your credit card account, providing you have some of your credit card cash limit available to you to do this. If your credit card is already ‘maxed out’ then you may still be able to withdraw cash with it but you will receive a penalty charge for going over your credit limit.
To withdraw cash, you put your card into the cash machine (a.k.a cash point or ATM) enter your PIN and select the ‘withdraw cash’ or ‘cash’ option.
You then just select the amount you want to withdraw, usually in increments of £10. Some cash machines may offer £5 notes as well as £10 and £20 notes, but if it runs out of £5s and £10s it will only be able to offer withdrawals in increments of £20.
Some cash machines charge the cardholder a set fee of around £1.50 for withdrawing cash using a credit or debit card. Before you make a withdrawal, the machine should tell you if it is going to charge you for using this facility.
It is important to realise that withdrawing cash with a credit card costs a lot more than if you were to use a debit card.
Firstly, your credit card provider will charge you a transaction fee for taking cash out with your credit card in the form of a percentage of the amount you withdrew (this will be on top of any fees a particular cash machine charges you). The provider will often set a minimum amount that this charge can be so if the percentage amount is lower than the minimum amount then you will end up paying the minimum amount. The back of your credit card bill should tell you how much the percentage and minimum fees are for your credit card, but they are generally between 2% and 3% (min. £2 to £3).
Secondly, your credit card provider will charge you interest on any cash withdrawals made using your credit card. This interest is usually charged from the date the transaction was made until the amount is paid back in full.
Interest rates (APRs) on cash withdrawals are usually between 25% and 29% - almost double the rate you will likely be charged on your purchases.
What’s more, any payments you make on your credit card will go towards paying off the cheapest debt first. As cash balances are charged at the highest rate of interest, any payments you make towards your credit card bill will go towards clearing these last. You will therefore be paying the higher interest rates for the longer period of time on any cash withdrawals you make.