A credit card might be the easiest option for most people when some quick cash is needed. It is immediately accessible and offers some breathing space before payments. But how do you liquidate credit cards into cash? This article explores the answer and explains whether doing this is a good idea.
What Does It Mean to Liquidate Credit Cards?
Liquidating credit cards refers to taking a loan in the form of cash from the issuer as part of the line of credit it has extended you.
If your card issuer provides this facility, taking advantage of it is usually quite easy.
You can simply go to a nearby ATM and withdraw cash using your card.
Here is the step-by-step process to do so:
- Insert the card
- Enter the credit card PIN
- Choose “Cash Advance.”
- Enter the amount and hit ok.
Accessing cash by presenting your card at a bank branch is also possible.
Users should keep in mind that there are limits to the amount that can be withdrawn.
This is normally a percentage of the credit limit offered on the card.
Moreover, banks often levy additional charges for providing this facility, such as extra interest over and above the APR.
Does Liquidate Mean Cash Out?
Yes, the terms liquidating, cash advance, and cashing out are all used interchangeably in reference to credit cards.
For debit cards, however, the last simply means withdrawing money from the bank account.
This differs from liquidating credit cards because the money taken with the debit card is not a loan.
Does Liquidation Affect Credit?
No, cash advances are not reported separately to the credit bureaus.
They just get added to the outstanding balance on the card.
The credit scores will only get impacted if the one cashing out cannot repay the amount within the repayment period.
As long as all outstanding balances are cleared, there is no impact of liquidating your card on credit.
How to Liquidate Credit Cards into Cash
Apart from the methods we already mentioned, there are other ways to use credit cards to obtain cash.
Liquidating a card often comes with cash advance fees.
Moreover, if you cannot repay the amount along with other credit card payments, it can also impact your credit scores.
Hence, we have shared below some other ways to get cash through a credit card without facing these problems.
Prepaid Gift Cards
Buying gift cards is almost equivalent to getting cash if you shop at the store regularly.
Some of them even offer discounts on shopping.
You can use your credit card to purchase such gift cards and use them to make purchases.
If shopping is not on your mind, it is possible to resell gift cards at nearly the same price.
In this way, one can get hard cash directly.
If you know a place where valuable items can be bought cheaply, they can be used to generate cash using a credit card.
For example, thrift stores and value shops often have bargain deals on items that are otherwise pricey.
You can buy the product using your credit card and sell it for cash online.
By using the card, upfront cash payments to buy the goods are avoided.
As long as they can be sold within the credit card due date, it is possible to get money without spending anything.
However, keep in mind that banks might consider wire transfers or money orders for certain types of goods as cash advances.
If this happens, they will charge interest on the amount, which can lower your payout.
In certain cases, credit cards offer blank checks that can be written to anyone.
They might even offer a zero-interest period on using these checks as a promotional offer.
If so, it is possible to simply write out a check to yourself and withdraw cash from the bank.
However, the terms and conditions in such deals are usually quite complex, so comb through them diligently before going ahead.
Paying Bills With a Card
If immediate cash is the requirement, you can start putting those bills that are paid using cash on credit.
There are many services that we normally pay using cash, such as handymen, maids, or monthly house rent.
It might be possible to pay such individuals with credit, usually for a small convenience fee.
This can free up a bit of cash for right now.
However, remember that the bills will eventually have to be paid in the next credit cycle.
Hence, this strategy will only work if it is possible to generate money to repay by the next due date.
Pay For Others With Card and Get Cash From Them
You might be able to find friends or family members who do most of their transactions in cash rather than credit.
In such cases, offer to pay their bills using a card and ask them for cash in return.
They can also make interbank transfers or do P2P transactions using apps such as Venmo and PayPal.
However, remember that explicitly cashing out cards is prohibited on such apps.
The transaction has to be a peer-to-peer one.
A cash advance may seem like the easiest option due to easy availability.
However, it can also cause defaults later on if the dues are not cleared on time.
This can be a nightmare because of the excessive APRs and late payment fees that keep piling on further debt on the borrower.
Here are some alternatives that might be safer:
- Spend less! Cut out any frivolous expenses.
- Take out a personal loan with a bank.
- Find a higher-wage job or try doing double shifts.
- Borrow money from friends or family as a soft loan.
- Sell off items not needed online or through a local yard sale.
Downside of Liquidating
As mentioned earlier, taking a credit card cash advance is not always the best idea.
Here are some reasons why it might create problems later on.
Cash Advance Fee
Credit card companies levy a charge on taking out a cash advance.
In most cases, a convenience fee is added on top of the APR for this facility.
Moreover, banks might add additional interest charges if the payment is not made on time.
Sometimes, they won’t even offer a grace period for repaying these transactions.
Available Amount Might Not Be Enough
Every card comes with a certain credit limit on it.
This is the highest credit line that the bank believes you are worthy of, based on credit history and other factors.
How much can be liquidated from a credit card is normally a percentage of this amount.
If it is not very high, the available cash may simply be too small to cover your requirements.
It may seem like taking just a few dollars, but every penny adds up to make your credit card bill.
If repayments are not made timely, a credit card debt can cost you much more in terms of late fees, interest charges, and so on.
Can I Transfer Money from My Credit Card to My Bank Card?
Yes, it is possible to do this in two ways: through a cash advance or a balance transfer.
However, both options carry some risks with them.
We have already mentioned the issues with cash advances above, so let’s discuss the latter.
A balance transfer is an option that lets you move debt from one account to another.
For example, any money owed in your bank account can be moved to a credit card.
If the interest rate on the existing loan is very high, this move can even help to save money.
For example, a credit card company sometimes offers a 0% APR introductory offer on its cards.
Moving a high-rate debt from your bank to such a card can save a lot of money.
However, remember that balance transfers also have charges, which can be as high as 3% to 5% of the amount being shifted.
Hence, it is important to go through the terms carefully before doing it.
In many situations, there may be no other option but to use a credit card to get cash.
It is the most easily accessible form of credit to most Americans.
However, before liquidating a credit card, one should understand that there might be certain charges to be paid.
Moreover, credit card debt can create a vicious cycle of late payment fees and interest charges if the amount remains unpaid.
Hence, it might be better to consider using other options before taking a cash advance, such as borrowing from friends and family.
There are ways in which a credit card can be leveraged to generate cash, like reselling cheap items for a higher price.
Whatever option you choose, always consider the future impact of the action carefully, and understand the terms and applicable charges.