Most credit cards give you the ability to take out cash from an ATM. While this may seem like an easy way to borrow money, you should avoid the option as much as possible. Here’s why:
Did you know that when you use your credit card to take out cash at an ATM, interest is charged starting on the day you withdraw the money? That means that even if you pay your credit card balance in full and on time, you’ll still be charged daily interest on the cash advance—and it’s almost always a higher interest rate than for purchases.
You’ll also be charged a significant cash advance fee for every withdrawal, as well as an ATM fee, which is usually between $2 and $5.
Let’s say you withdraw $100 with your credit card every week. By the end of the month, you could owe not just the $400 you borrowed, but an additional $40 in fees, as well as a month’s worth of daily interest charges. This makes cash advances a very expensive way to replenish the money in your wallet. Whenever possible, use your debit card instead, but if you do end up using a cash advance, try to pay off your balance as soon as possible, because the interest charged on cash advances costs you more each day you wait.
Understanding your financial rights and responsibilities means no surprises. The more you know, the easier it is to avoid costly surprises and to reach your financial goals.
Learn more at canada.ca/it-pays-to-know.