A credit card is a payment card that allows you to borrow money from the card issuer. Credit card loans are recurrent in that they allow you to borrow money. The good thing is that one can use credit cards just the way you use debit cards. That means that you can withdraw money among other kinds of transactions. I will show you how to withdraw money from credit card online later.
With a credit card, you can borrow and pay every month. If you borrow money this month, you have to repay the amount borrowed to borrow again the fllowing month. Credit card issuers usually give you a credit limit whereby you cannot borrow beyond the limit. Your credit score determines the credit limit that you receive from the said institutions. Again, there are credit cards that do not require you to have credit scores whatsoever.
Credit scores help to express a person’s creditworthiness. They show your capability to repay loans as per the creditor’s expectations. The credit scores are usually in numerals, whereby the numbers range from 300-850, with 300 being the worst credit scores while 850 is excellent. You attain good credit scores if you use your credit card appropriately. That means you have to pay your debts on time, have a low credit utilization ratio, and keep your credit card active.
How do I get a credit card?
You can get a credit card from a bank or credit union. You must have an active checking account to get started. Also open one to get started by gathering the requirements such as the Social Security Number, identification document, email address, physical address, and phone number. Banks and credit unions help you open accounts online, while others require you to open at a physical branch.
Once you get a checking account, you can proceed to request a credit card. If you have ever taken a loan before, you can ask for an unsecured credit card. The credit limit on your credit card will depend on the credit scores from the previous borrowings. As I mentioned earlier, low credit scores will only allow you to get a low limit, while high credit scores will reward you with a high-limit credit card.
Interestingly, if you have never taken any loan from a financial company, you can still apply for a credit card. However, since you do not possess any credit history, you will get a secured credit card. A secured credit card needs you to deposit an amount of money to act as security. If you cannot pay your credit card debt, your card issuer will use the credit card deposit to repay your loan. Usually, your credit card issuers will give you a limit way below your deposit to cater to the interest rate in case they use the deposit to repay your loan.
Secured credit cards are good to build your credit scores. You might be asking yourself, which credit card can I get with bad credit? Well, secured credit cards are also suitable for people with bad credit history. If you have bad credit scores, you can still opt for a secured credit card.
The good thing is that secured credit cards attract low-interest rates because they pose a low risk to the lender. Credit cards for bad credit attract high-interest rates that are harmful to someone’s financial status.
The cards also have low credit limits. For secured credit cards, you set the limit yourself depending on the amount of money you deposit. The more your deposit, the higher your credit limits and vice versa.
How do you use a credit card?
As I mentioned earlier, credit cards are payment cards, just like debit and prepaid cards. Therefore, you can use them in various kinds of transactions. The following are ways you can use a credit card.
i) Buy goods and services
Credit cards are beneficial when you need to buy something or pay for a service, and you do not have money in your checking account. You can borrow from your issuer to sort out your issues. You can either pay online or at a physical store, depending on the platform where you are making your purchase.
ii) Send money to others
Credit cards allow you to send money to other people. Credit card issuers allow you to open a credit card account online where you can manage your card. You can pay online, send money to others, view your limit balance, and check your transaction history. When sending money to others, you require the account number if the sender is of the same issuer as yours and both routing and account numbers if the recipient is of a different issuer.
iii) Withdraw money
Credit cards allow you to get cash advances from an ATM or over the counter. Withdrawing money from your credit card at an ATM is costly, and financial experts discourage that in the best way possible. You can also request your card issuer to transfer money from your credit card to your bank account or write a convenience check to yourself and cash it at a bank.
How to withdraw money from a credit card online
There are various ways you get money out of your card. Since you know that you can withdraw money from an ATM and over the counter, then it is high time you know how to withdraw money from your credit card online.
You can withdraw money online from your credit card by transferring money from your credit card account to your bank account. Remember that most credit card issuers allow you to deposit money to your checking account online. That way, you will have withdrawn money from your credit card to your bank account.
When transfering money online from your credit card to your checking account, you require the account number of the checking account. Not all credit card issuers allow one to transfer money from your credit card to your checking account. However, while this method is easy to help you get money, it can be risky since you might borrow too much money, thus ending up with a big debt.
How much does it cost to withdraw money from a credit card?
Withdrawing money from your credit card, also called a cash advance, is not that cheap. There are various fees that you have to pay to get the funds. The first fee is the cash advance fee. The fee can be a percentage of the amount you are withdrawing or somewhere between $5 to $10, whichever is greater. The withdrawal amount can vary from card to card.
Also, when withdrawing money from your credit card at an ATM, you have to part with some fees. Furthermore, a surcharge fee may apply if you withdraw from an out-of-network ATM. When withdrawing money over the counter, you might part with some fees depending on the financial institution you use for the service.
Another very inconvenient fee is the cash advance APR which is usually higher than the ordinary APR. You might end up paying so much for a small borrowing that may put you in a dangerous financial situation. Remember that the interest rates start accruing as soon as you take the cash advance. Therefore there is nothing like a grace period here.
How do you pay your credit card debt?
Once you borrow money from your credit card issuer, you have to repay it at the end of the month or as per the agreement with your card issuer. You can pay for your credit card debt via the checking account you used to borrow or receive money from others.
When paying debts for various credit cards, it is advisable to clear the cards’ debts with high-interest rates since these may charge high late payment fees if you do not pay on time. Also, it is essential to pay off the smallest debts first as you move to the ones with higher amounts. That way, you will reduce the number of lenders owing you.
But can you pay a credit card bill with another credit card? Well, it is possible to pay your credit card debt with another credit card. In most cases, you do this via the balance transfer strategy. The method allows you to take a new credit card with a lower balance and then arrange with your card issuer to repay your old credit card debt before closing it. You then transfer the debt to the new card, whereby you pay with a low-interest rate.
Why should you withdraw money from a credit card?
If you want to make a payment at a place that does not accept credit card payment, then withdrawing cash could be the only option left on your side. However, it must be the last option to avoid the hefty fees that follow the transaction.
Bottom line
Credit cards allow one to borrow money from a credit card issuer. There are credit cards for good credit and others for bad credit. You can choose a secured credit card if you do not have a credit history. Again, you can withdraw money from a credit card online or at an ATM. Credit card advances attract hefty fees compared to regular credit card usage.
