Using credit cards in ATMs

Credit cards can be used in ATMs, but there are some disadvantages.

Cash that is withdrawn from an ATM using a credit card counts as a cash advance.  Cash advances are treated differently from other spending on credit cards.

Cash withdrawals through ATMs in most cases are charged at a higher interest rate than other transactions.  Cash advances also tend to be paid off after the other balances on a credit card – such as those that come from balance transfers and spending on the card – are cleared.  This is being regulated by the Credit card Act. This will mean that the higher interest rate will run up for longer.

Cash withdrawals through ATMs in almost every case will not have an interest free period and interest at the higher rate will be charged from the time that it is taken out.  This is the case even if the balance is paid off as soon as the statement is received.

If the card is used in a machine for a different bank network then there will often be a fee for using the ATM.  There may be a warning before the fee is charged, but this is not always the case.

Although there may be a high credit limit for the withdrawal it is unlikely that it can be taken out at once.  This is partly because ATMs can enforce a limit on the credit cards and what can be taken out, but it may also be that there is a separate credit limit for cash advances.  The credit limit for cash advances is a proportion of the overall credit limit.  On some of the prestige cards it may be the whole of the credit limit, but it is usually considerably less.  This should be shown on a statement.

Cash advance rules are not simply applied when a credit card is used in an ATM.  It also counts for gambling or credit card checks.

Cash advances are not targeted at the users out of spite.  This is because with credit card spending there is a merchant fee paid by the vendor for the processing of the credit card.

Using credit cards in foreign ATMs can attract further fees as they are counted as overseas transactions.  They may also have some foreign exchange costs as foreign exchange is charged at the credit card company’s rate, although in most cases the rate is near the market rate.