Usage

• The convenience and speed of taking out money using a credit card has led to its popularity. More than 1 million people use their credit cards to withdraw cash for their mortgages and bills, according to uSwitch. Many of these people don't realize that using their credit cards in this way leads to high charges. About 69 percent don't understand how much they have to pay for this service, and 12 percent think cash withdrawals with a credit card and a debit card are essentially the same.
  
  

Upfront Charge

• When you withdraw cash using a credit card, the credit card issuer charges you an up-front fee. The amount of this fee varies depending on the credit card issuer and the credit card product, but it is usually a percentage of the amount you withdraw. Bankrate reports that credit card issuers usually charge 2 to 4 percent of the withdrawal amount as an up-front fee. For example, if you withdraw $500 and your card issuer charges you 4 percent, you have to pay $20 up front for the withdrawal.
  
  

Interest Accumulation

• In addition to the up-front fee, you also have to pay interest on the money you withdraw. This is usually a higher interest rate compared to the rate for regular purchases. The interest starts accumulating from the day you take out the money. Compare this with a regular purchase, which gives you an interest-free period. As long as you pay for a regular purchase before the due date shown on your card statement, you don't have to pay any interest.
  
  

Considerations

• Credit card issuers charge you a higher fee for for a cash withdrawal because it costs them more money to process it. Also, credit card holders who often withdraw cash are more likely to not pay their credit card debt, according to Bankrate. Instead of withdrawing cash from your credit card account, use your debit card to withdraw the money, or pay for purchases directly with a credit card instead of cash. If you withdraw money using your credit card, pay off the amount as soon as possible to minimize the interest charges.