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Hidden Fees to Watch Out for When Changing Credit Card to Money
Converting a credit card into money may seem like a handy answer once you’re quick on funds, but it can come with significant hidden costs. Whether you’re utilizing a cash advance, third-party service, or digital wallet trick, these transactions usually embrace costs that may quietly drain your finances. Understanding these hidden charges may also help you make smarter monetary selections and keep away from unpleasant surprises on your subsequent credit card statement.
1. Cash Advance Fees
The commonest way to convert a credit card to money is through a cash advance, however this convenience comes with a hefty fee. Most card issuers charge a cash advance payment ranging from three% to 5% of the withdrawn quantity, or a flat price of $10–$15—whichever is higher.
For example, in the event you withdraw $1,000, you might instantly owe $50 in fees. That’s before any interest charges even start accumulating. This charge is typically added to your balance instantly, increasing your total debt.
2. High Interest Rates from Day One
Unlike common credit card purchases that benefit from a grace period, money advances begin accruing interest immediately—from the moment the transaction is processed. These interest rates are usually much higher, typically ranging between 24% and 35% APR depending on the card issuer.
Even should you repay your cash advance quickly, the lack of a grace interval means you’ll pay interest no matter what. This can make borrowing money from your credit card probably the most costly brief-term options available.
3. ATM Withdrawal Charges
When you withdraw money from an ATM using your credit card, you’ll likely face ATM operator charges in addition to your card issuer’s money advance charges. These charges often range between $2 and $10 per transaction, depending on the ATM provider and location.
If you happen to use a foreign ATM, expect additional currency conversion and international transaction fees, which can increase your total costs by another three%–5%. Over a number of withdrawals, these small prices can quickly add up.
4. Hidden Conversion or Service Charges
Some people use third-party apps or services to convert their credit limit to money through indirect strategies—resembling sending money to themselves via digital wallets or online payment platforms. While these workarounds may appear cheaper, they usually hide service expenses within their processing fees.
For example, digital platforms like PayPal, Venmo, or sure money transfer apps can cost 2.9% or more once you send money using a credit card. Additionally, your card issuer would possibly still classify the transaction as a money equal purchase, applying cash advance fees and higher interest rates on top of the service fee.
5. Foreign Transaction Fees
In the event you’re abroad and attempt to withdraw money utilizing 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 may be combined with both ATM and money advance charges.
Even if your bank advertises "no international transaction fees," the ATM operator abroad may still add its own local service payment—which you won’t see till after the transaction is complete.
6. Balance Transfer or Convenience Check Fees
Some card issuers provide convenience checks or balance transfer options that effectively allow you to move your credit balance right into a checking account. While this may sound interesting, these transactions often contain a balance transfer charge of three%–5%.
Moreover, interest on these transfers typically begins right away unless a promotional zero% interval applies—which is uncommon for money-associated transfers.
7. Dynamic Currency Conversion (DCC) Costs
In case you withdraw money abroad and the ATM affords to transform your funds into your home currency, think twice earlier than 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 often cheaper to be billed in the local currency instead.
8. Impact on Credit Utilization and Score
Although not a direct fee, converting your credit card into money can indirectly damage your credit score. Money advances increase your credit utilization ratio, which might lower your score when you approach your credit limit. In addition, card issuers view frequent money advances as signs of economic distress, potentially affecting your future creditworthiness.
Final Advice
While converting credit card funds to money can clear up quick-term cash problems, the hidden charges and high interest rates make it an expensive option. Instead, consider alternatives similar to personal loans, peer-to-peer lending, or emergency savings. Understanding these costs before you swipe or withdraw can prevent hundreds of dollars—and aid you keep healthier financial habits within the long run.
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