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Hidden Fees to Watch Out for When Changing Credit Card to Cash
Changing a credit card into cash could appear like a handy solution once you’re quick on funds, but it can come with significant hidden costs. Whether or not you’re utilizing a cash advance, third-party service, or digital wallet trick, these transactions often embrace fees that can quietly drain your finances. Understanding these hidden charges may help you make smarter monetary selections and keep away from unpleasant surprises on your next credit card statement.
1. Cash Advance Fees
The commonest way to convert a credit card to money is through a money advance, however this convenience comes with a hefty fee. Most card issuers charge a cash advance fee ranging from three% to 5% of the withdrawn quantity, or a flat charge of $10–$15—whichever is higher.
For instance, in case you withdraw $1,000, you might immediately owe $50 in fees. That’s earlier than any interest expenses even start accumulating. This charge is typically added to your balance instantly, rising your overall debt.
2. High Interest Rates from Day One
Unlike common credit card purchases that benefit from a grace period, cash advances start accruing interest instantly—from the moment the transaction is processed. These interest rates are normally a lot higher, typically ranging between 24% and 35% APR depending on the card issuer.
Even for those who repay your cash advance quickly, the lack of a grace interval means you’ll pay interest no matter what. This can make borrowing cash from your credit card probably the most expensive brief-term solutions available.
3. ATM Withdrawal Fees
If you withdraw cash from an ATM using your credit card, you’ll likely face ATM operator charges in addition to your card issuer’s cash advance charges. These charges often range between $2 and $10 per transaction, depending on the ATM provider and location.
When you use a international ATM, count on additional currency conversion and international transaction fees, which can raise your total costs by one other three%–5%. Over multiple withdrawals, these small expenses can quickly add up.
4. Hidden Conversion or Service Charges
Some folks use third-party apps or services to transform their credit limit to money through indirect methods—equivalent to sending cash to themselves via digital wallets or online payment platforms. While these workarounds might sound cheaper, they often hide service charges within their processing fees.
For instance, digital platforms like PayPal, Venmo, or sure money transfer apps can charge 2.9% or more whenever you send money utilizing a credit card. Additionally, your card issuer may still classify the transaction as a money equivalent purchase, applying cash advance fees and higher interest rates on top of the service fee.
5. Foreign Transaction Charges
Should you’re abroad and try to withdraw money using your credit card, your issuer would possibly impose a foreign transaction fee. Typically between 1% and three%, this price applies to the total quantity withdrawn and will be mixed with both ATM and cash advance charges.
Even when your bank advertises "no foreign transaction fees," the ATM operator abroad may still add its own local service payment—which you won’t see until after the transaction is complete.
6. Balance Transfer or Comfort Check Charges
Some card issuers supply convenience checks or balance transfer options that successfully assist you to move your credit balance into a checking account. While this would possibly sound interesting, these transactions often involve a balance transfer price of 3%–5%.
Moreover, interest on these transfers often begins proper away unless a promotional 0% period applies—which is rare for money-associated transfers.
7. Dynamic Currency Conversion (DCC) Costs
For those who withdraw cash abroad and the ATM presents to convert your funds into your home currency, think twice before agreeing. This option—known as Dynamic Currency Conversion (DCC)—typically makes use of poor exchange rates and adds 2%–6% additional cost to your withdrawal. It’s usually cheaper to be billed within the local currency instead.
8. Impact on Credit Utilization and Score
Though not a direct charge, converting your credit card into cash can indirectly hurt your credit score. Money advances raise your credit utilization ratio, which could lower your score when you approach your credit limit. In addition, card issuers view frequent money advances as signs of financial distress, potentially affecting your future creditworthiness.
Final Advice
While converting credit card funds to money can solve brief-term money problems, the hidden charges and high interest rates make it an expensive option. Instead, consider options comparable to personal loans, peer-to-peer lending, or emergency savings. Understanding these costs before you swipe or withdraw can save you hundreds of dollars—and make it easier to preserve healthier financial habits in the long run.
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