100 Words On: The Dumbest Place Where People Use Credit Cards

Responsible folks love the plastic in their wallets because credit card benefits simply can’t be matched by cash. However, there are several places where credit cards shouldn’t ever be used. Financially speaking, one of the most expensive mistakes any consumer could make is to use a credit card to withdraw cash from an ATM. Such transactions typically come with an onerous cash advance fee of four percent or higher. Even worse, there’s no grace period — so interest begins accruing immediately.

The bottom line: Whenever you’re forced to use an ATM, whip out a debit card instead — your bank account will thank you.

Photo Credit: Frank Hebbert

21 comments to 100 Words On: The Dumbest Place Where People Use Credit Cards

  • PK

    I see your ATM, and I raise you an ATM on a Casino Floor! Double down!

    • Len Penzo

      Oy! Yep, a casino was definitely one of the other ill-advised places I was alluding to in the post. Bret hits another one in the next comment …

  • I was thinking bars.

    Not only do people over-consume (and are over-served), it’s the most likely place to have your card number stolen. Cash at bars is always a good idea.

    • Len Penzo

      I didn’t realize that a bar is the most likely place to have your credit card number stolen, Bret. It kind of makes sense though; it seems like there would be more opportunity.

  • Yep, definitely a bad idea to use a credit card for cash advances. In addition to the big cash advance fee and higher interest, this portion of your balance is the last part to be paid off. So if you are doing this and carrying a balance, expect big interest charges until you clear the full balance.

    • Len Penzo

      “This portion of your balance is the last part to be paid off.”

      Great point! It is one of the worst payment “penalties” the credit card companies impose on their customers — the gift that keeps on giving. (Or should I say “taking”?)

  • Using a credit card for any cash advance is dumb! Credit cards are supposed to be a convenient way of paying for things. Paying those rediculous fees and interest is dumb.

  • Good reminder, but since I can never remember my PIN number, I’m cool….

    • Len Penzo

      I can’t remember the last time I used an ATM either, Dr. Dean. Oh wait … yes, I can. Somewhat ironically, I last used one at last year’s Financial Blogger Conference — but only because my taxi driver would only take cash and my wallet was empty.

  • The number one rule of using credit cards is to avoid them for cash advance. Not only the fee and interest is high, most times you will be able to pay for what you wanted with the Credit Card itself. Maybe the merchant may want to charge ~3% processing fees. We had to do this with our rent once.

    • Len Penzo

      “Most times you will be able to pay for what you wanted with the credit card itself.”

      Another great point!

      (This is why I love these “100 Word” posts; the readers always do a great job filling in the holes that can’t possibly be covered in such a short article!)

  • Only had to do it one time!!!

  • This is why I only carry two credit cards and an ATM card. Only the ATM card gets used at an ATM… if it’s a free-use ATM. My credit union has a handy app on their web page to locate free-to-use ATM’s in your area.

    What makes a cash advance especially dumb is, it’s so easy to get extra cash back on a merchant purchase instead. For some reason, extra cash back is treated as part of the purchase, and subject to the same terms. I keep waiting for credit card companies, after training people to get extra cash back during a purchase, to pull a switch and begin treating it as cash advances.

    Dumb as it is, there are worse things than a cash advance on your credit card. How about payday loans or (car) title loans? Those make cash advances seem reasonable by comparison.

    • Len Penzo

      “What makes a cash advance especially dumb is, it’s so easy to get extra cash back on a merchant purchase instead. For some reason, extra cash back is treated as part of the purchase, and subject to the same terms.”

      I love you guys! Another outstanding observation, DC.

  • Great tip, Len! It’d be interesting to know just how many people use the “cash advance” feature of their credit cards.

    • Len Penzo

      I sure hope it is not many, Bethy. The fees and interest are really onerous. This gives me a chance to also expound on my original point about the fees I put in the article; that 4 percent cash advance fee is based upon the amount of money withdrawn — but there is typically a $10 minimum charge. So if you’re crazy enough to use a credit card to withdraw just $20, you’re charged $10 right off the bat on top of the interest charges (possibly upwards of 24 percent or more) that begin accruing immediately and any applicable ATM transaction fees. Ouch!

      That is really expensive and borders on loan shark type charges. The only difference is the credit card companies won’t sent some guy named Vito over to break your legs if you’re late on a payment.

  • So true! I don’t hesitate to use my credit card for a $1 purchase at the dollar store (and pay it off in full every month), but never in a million years would I get a cash advance from it – there’s no avoiding the interest!

  • I think the really stupid / sad thing here is that the people who actually WOULD use a credit card for a cash advance – actually have credit cards! They’re clearly not ready for the responsibility of credit.

  • And I usually order from 2 different places, it depends what type of pizza or dinner I’m in the mood for. Both places know me by my phone number on their caller ID and usually know what I order too. When we had that freak snow storm in October and electricity was out for just about everyone, my pizza place was open, but wasn’t able to run credit cards, and I had no cash on hand, he let me have the pizza and told me to pay him when I could. Now that’s a good place to do business with.

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