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Why would a credit card allow you to spend on it but not withdraw cash?

(44 Posts)
CatAndHisKit Tue 29-Sep-20 01:48:29

I don't get it - they are getting higher interest rate on cash withdrawl, but it seems to be the case if you keep paying a minimum payment only (monthly).
There is a credit limit (not that high) in place and a limit on what can you withdraw. I only have 300 available to spend on it currently so withdrawing just 300 seems like a petty amount compared to all interest/fees they get from me. Why not then disallow any use of the card?

OP’s posts: |
Forgone90 Tue 29-Sep-20 01:51:48

People that use the cash advance from a credit card are more likely to get into financially difficulty. Card companies know this so will not want you taking the whole limit out in cash as the chances are you won't be able to pay it back.

araiwa Tue 29-Sep-20 02:07:54

If you need to withdraw cash on a credit card your finances are probably a mess... Finance companies don't like giving cash to people who can't pay it back

Pixxie7 Tue 29-Sep-20 02:25:41

If you are near your credit limit they are probably worried it will take you over your limit as I think interest is charged from day one. You could try 200 instead.

JaJaDingDong Tue 29-Sep-20 02:39:39

Why DO you need to withdraw cash with your credit card? That's not usual.

avamiah Tue 29-Sep-20 02:48:33

The answer is because you are into your unauthorised overdraft.
I mean overdraft is bad enough but when you go over that ( usually only once ) lol it’s bad . You can never withdraw cash when in Overdraft never mind unauthorised overdraft .
I know this from experience unfortunately .

eaglejulesk Tue 29-Sep-20 02:51:07

Why DO you need to withdraw cash with your credit card? That's not usual.

Of course it's usual, that's why you are able to do it confused it may not be a sensible thing to do, but banks allow it.

I agree with a pp, it's probably because you are getting so near to your limit.

choli Tue 29-Sep-20 02:56:20

Of course it's usual, that's why you are able to do it confused
Not amongst the financially responsible.

eaglejulesk Tue 29-Sep-20 03:13:18

Of course it's usual, that's why you are able to do it confused
Not amongst the financially responsible.

If you bothered to read the rest of my post I did say it may not be sensible! Not very kind of you to refer to the OP as being not financially responsible either - sometimes needs must.

JaJaDingDong Tue 29-Sep-20 03:20:41

I don't think it's either usual, nor a good idea - withdrawing cash you don't have. It's effectively a very expensive loan.

eaglejulesk Tue 29-Sep-20 03:28:20

I don't think it's either usual, nor a good idea - withdrawing cash you don't have.

Maybe not, but have you never heard of an overdraft - it's the same thing!

Love the all the judgement on MN, you have no idea of the OP's circumstances. She is allowed to withdraw cash from her credit card without being told how wrong it is. She asked a simple question, not for advice on her spending habits.

Ponoka7 Tue 29-Sep-20 04:46:13

These rules came in when the credit card industry was tightened up. People didn't realise that until they paid the balance in full, often extra charges would be continued because they'd withdrawn cash. They thought, 'pay the cash amount back and that's it', but you had to clear your card and start again. The interest was higher on cash withdrawal.

It's an expensive way of borrowing and it's to protect vulnerable people. I see your point, the interest is still less than the likes of provident.

NekoShiro Tue 29-Sep-20 07:15:45

Drawing cash off a credit card probably has a lower interest than a payday loan.

Oysterbabe Tue 29-Sep-20 07:21:54

What do you need to buy that you can only use cash for?

BooFuckingHoo2 Tue 29-Sep-20 07:23:23

There’s some right bollocks being spouted on this thread grin.

People didn't realise that until they paid the balance in full, often extra charges would be continued because they'd withdrawn cash. They thought, 'pay the cash amount back and that's it', but you had to clear your card and start again.

Not true - the payments are allocated against the highest interest transactions first. E.g. cash balance £200 purchases £400, you pay off £300 and it will clear the cash balance and £100 of purchases. Worth noting that there’s often a fee for withdrawing cash so you withdraw £200 and are charged £203 for instance.

You can never withdraw cash when in Overdraft never mind unauthorised overdraft .

Again this is completely wrong hmm you can absolutely withdraw cash when in an authorised overdraft.

Stupidsocials Tue 29-Sep-20 07:25:32

It’s because that’s the quickest way to get into real financial trouble, if you don’t have enough cash that you need to use your card that’s not a good thing...

Stupidsocials Tue 29-Sep-20 07:27:06

‘Maybe not, but have you never heard of an overdraft - it's the same thing! ‘

My OD limit is £1k. My CC limit is £21K. Big different in the amount of debt I could find myself in...

speakout Tue 29-Sep-20 07:31:18

If you are repaying only the minimum amount a month your account will be marked as one that may be struggling. So probably a block put on cash withdrawals.
I have several credit cards - one that I use for Netflix only- £7.99 a month is the only spend. I have it set up to pay off the amount in full every month which takes my account back to zero, but is also the minimum payment.
I regularly get letters of concern from the company pointing out I am only paying the minimum amount and do I need to speak to a debt advisor.

OP do you have a plan to pay off the debt?
Paying interest and fees like this is not ideal and even if you need to carry debt for a while there are cheaper ways to do it.
You could do a balance transfer to another card which would give you 0% interest for a while - or even get a bank loan.
In both circumstances cut up the card!!

Asiama Tue 29-Sep-20 07:38:54

OP I don't get it either. FIL has a German credit card and he has no charges for withdrawing money, but has to pay charges for using it in shops confused

EggysMom Tue 29-Sep-20 07:47:40

As others have said, I think it's because it's the 'last' £300 you have available on the card. They may be concerned for your motives - max out the card and then stop paying. Or it may be that, with interest being applied immediately, the very next day you would be over the maximum; so you could try seeing if it lets you withdraw £200 instead.

Of course the answer is to phone customer services for the credit card and ask them.

BarbaraofSeville Tue 29-Sep-20 07:51:05

Banks often have rules that make no sense and don't react to changes in customer behaviour.

I was once criticised for using my overdraft every month, despite having substantial savings with the same bank. I used my overdraft because it was interest free up to a certain amount so didn't cost me anything and I could have paid it off any time I wanted to, but didn't see the point.

I've never had problems withdrawing hundreds of pounds worth of foreign currency in cash but it was always paid back within a few days.

I suppose these days, when just about everywhere accepts credit cards, banks see the need to question why anyone needs large amounts of cash and might think that you've borrowed money from a friend, relative or unofficial source like a loan shark.

Plus, if you're only paying the minimum and are close to your limit, that probably indicates to them that you're in financial difficulty. You can remove the minimum payment marker by simply setting up a standing order to pay £1 over the minimum.

But if you are only paying the minimum or not much more, chances are that almost all the money you pay them is going on interest and only a tiny amount is going towards your debt.

There's now rules in place that stops this situation continuing for years on end - banks are required to send you down the 'persistent debt' route, which basically stops them from taking endless interest from you and keeping you in debt for decades.

BrazenlyDefying Tue 29-Sep-20 07:51:58

Agree with the others, it's a sign of financial difficulties and irresponsible spending. If your bank account is so empty that your only option for cash is to draw it out on a credit card, that's not a good sign, is it?

I don't think i've ever drawn money out on a credit card in the UK, maybe overseas.

Igotthemheavyboobs Tue 29-Sep-20 08:00:16

What is the difference between taking it out in cash or spending the same amount in a shop?

I remeber the charges I got once for taking cash out on a credit card. I didn't have my bastarding debit card on me and the cafe took cash only 🙄 that was coffee cost me a small fortune. This was about 10 year ago though.

BarbaraofSeville Tue 29-Sep-20 08:03:10

If you are paying interest and fees on a credit card, that sounds like you are in financial difficulty or on the verge of being in this position as otherwise these are to be avoided as they're such a waste of money and unnecessary spending on absolutely nothing that benefits you and all it does is makes lots of profit for your bank.

The sooner you do something about this, the easier it will be to get onto a better financial footing, potentially avoiding years of stress and worry.

It might not feel like it, but when your bank starts refusing to lend you money, they're actually doing you a favour, because this could be the start of getting things sorted out for good. Have a look at:

www.moneysavingexpert.com/loans/debt-help-plan/

BrazenlyDefying Tue 29-Sep-20 08:03:14

Because taking out cash is more expensive. You pay interest on it from the start. If you spend on a card in a shop and pay the bill as soon as it arrives, it costs nothing.

People do not routinely withdraw cash on a card unless they have no other option.

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