Learn how cash withdrawals with a credit card work, how much they cost, and whether it’s worth using this service.
Withdrawing cash using a credit card is very simple. At an ATM, simply select the credit card withdrawal option and the money will be dispensed, provided the requested amount is within your credit limit. See how much a credit card withdrawal costs and if it’s worthwhile.
Sometimes, when you’re in debt and don’t have money to pay your bills or need a sum of money for another reason, withdrawing cash from your credit card may be the only option. It’s important to remember that, since it’s a type of loan, you’re using money that doesn’t exist in your account, so there will be withdrawal fees and interest.
Learn more about how credit card withdrawals work:
How does cash withdrawal work with a credit card?
Cash withdrawal from a credit card is a way to withdraw money that allows a credit card holder to withdraw cash directly from an ATM, similar to a bank withdrawal. This method differs from a purchase because it’s not made from the credit card balance, but rather directly from the customer’s credit limit.
This withdrawal, also called an emergency withdrawal, can only be made by those who have a credit card. The amount is based on your credit limit. It’s an interesting option for those who need emergency cash or who don’t have enough money to pay for a purchase.
However, it’s important to keep in mind that cash withdrawals from a credit card are generally more expensive than a purchase made with the card, as the customer may have to pay additional fees, interest, and other charges. This method is essentially a type of loan, since the bank is “lending” this money to you.
Therefore, emergency withdrawals incur interest, and it’s not a low interest rate. Therefore, before withdrawing money with your credit card, it’s important to consider whether this is truly the best option and if the fees charged outweigh the benefits.
On the other hand, cash withdrawals from credit cards are offered by some of the main Brazilian banks, such as Bradesco, Itaú, and Santander. You can withdraw money using ATMs, as well as other bank branches and banking correspondents, depending on the bank.
Withdrawing money from a credit card is quite simple. You can go to an ATM and select the credit card withdrawal option to access the money. The amount is then credited to your checking account. Remember that the requested amount must be within your credit card limit.
How much does it cost to withdraw cash from a credit card?
The amount you can withdraw varies depending on your credit card limit. The withdrawal fee and interest rates vary depending on the bank or financial institution. The interest charged is the same as for revolving credit (the interest charged when you pay the minimum amount due on your bill).
Cash withdrawals on a credit card usually have a service fee of 3% of the amount withdrawn, in addition to any charges levied by the financial institution. Therefore, these are not low interest rates, which is why this option is called an emergency withdrawal; only request it when there is no other option, as you will be paying high interest rates. Furthermore, the bank may also charge a fixed withdrawal fee.
In addition, it’s important to check the availability of emergency withdrawals, as not all cards offer this option. It’s important to remember that cash withdrawals on a credit card are not paid in cash, but rather credited to your card statement.
Is it worth withdrawing from your credit card limit?
Is this type of cash withdrawal worthwhile? It varies from case to case. While using a credit card for cash withdrawals might be beneficial for some, it isn’t for others. But generally, most of the time this practice isn’t worthwhile.
Although it can save you money at the end of the month, the interest rates charged for this type of withdrawal are the highest on the market. Therefore, it’s usually more worthwhile to research other types of credit or even borrow money from relatives or friends.
But if there’s no other way, use your credit card to make the withdrawal you need. Don’t forget that the following month you’ll need extra available money to pay off this new debt!
And what about the overdraft limit?
Another well-known microcredit option, which works very similarly to a credit card withdrawal, is the overdraft facility.
When you check your account and see the information “overdraft limit,” this is the pre-approved limit you have available in your checking account for withdrawal. This limit exists to cover unforeseen expenses related to your checking account, but don’t be fooled, the overdraft limit is actually a form of loan to be used in case of everyday emergencies, and therefore, the limit is usually not very high.
In addition to being available for withdrawal, the overdraft limit, which is always available in your checking account, can also be used to pay bills and make transfers to any bank via TED or DOC.
Emergency withdrawals from your overdraft facility can be made at any ATM; it works the same way as withdrawing from your normal limit—simply use your debit card at the teller window. The ease of access contributes to the high interest rates charged for this type of service. On the other hand, paying off the debt is also very easy; you just need to deposit the money owed into your checking account to pay off the overdraft.
How much does it cost to withdraw money from an overdraft facility?
The pre-approved overdraft limit is assessed by the bank according to your financial transactions. Because it’s a type of loan without collateral, the interest charged for this service is very high. It’s the second highest on the market, surpassed only by revolving credit card interest rates. Each bank will define its own interest rate for overdrafts, so research before contracting one.
However, in 2020 the Central Bank announced a measure that will stipulate a maximum interest rate to be charged on overdrafts. The maximum interest a bank can charge will be 8% per month. This measure was taken to prevent over-indebtedness among the population, since with the interest rates previously practiced, the initial debt could quadruple in a year.
Evaluate before withdrawing from your credit card
Cash withdrawals from credit cards or overdraft facilities are more expensive options for getting money in an emergency, so carefully consider whether taking out these loans is worthwhile. A more attractive alternative in this case is to apply for a personal loan. Interest rates are much lower, and you have the option of installment payments, knowing exactly how much you will owe the following month. Use our Personal Loan comparison tool to compare rates.