Home»Blog»Banking»Credit Card Cash Withdrawal: Should You Withdraw Cash with Credit Cards?
Credit Card Cash Withdrawal: Should You Withdraw Cash with Credit Cards?
11 July 2022
Credit cards are becoming more of a need than a luxury because of their improved features and perks. Most credit cards, depending on their type, come with a host of benefits, like reward points, cashback, air miles, etc. Also, like debit cards, you can withdraw cash through credit cards too. However, there’s a catch. Credit card cash withdrawals come with hefty interest rates that you need to repay via EMIs.
So, read this blog before you decide to withdraw cash with your credit card.
What Is Credit Card Cash Withdrawal?
Can you withdraw money from a credit card? Yes, credit card users can withdraw cash from ATMs. However, there’s a cap on the mount you can withdraw – usually linked to your credit card limit. However, unlike debit cards, cardholders must pay back the amount borrowed plus interest and other fees.
Credit card users should be aware that not all credit cards offer the ability to withdraw cash and that different banks may have additional restrictions on the amount that can be withdrawn and the financial fees that apply.
Now let’s move ahead and try to answer how to get cash/withdraw money from a credit card.
How to Use a Credit Card to Withdraw Cash?
The process of withdrawing cash from an ATM using a credit card is the same as withdrawing cash with a debit card. To retrieve the money, simply stroll into any of your nearby ATMs with your credit card and follow the cash withdrawal instructions. Credit card cash withdrawals are available at ATMs of any bank, regardless of the credit card issuing bank. However, some banks may impose a separate cash advance fee if you take money from another bank’s ATM. A few banks may limit the amount of cash withdrawn per ATM transaction or day.
As a result, before using the cash advance service, you should know the terms and conditions of your card and the associated fees. Additionally, it’s crucial to know the card’s available cash limit before withdrawing money to avoid going over it.
Now let’s see what credit card cash withdrawal charges are
What Is the Interest Charged on Credit Card Cash Withdrawal?
Credit Card Cash Advance Fees are assessed on each cash withdrawal transaction completed with a credit card. Cash advance fees are a small portion of the total amount withdrawn as credit card cash withdrawal charges are charged whenever you use a credit card to make a cash withdrawal.
As a credit card cash advance fee, banks typically charge between 2.5% and% of the withdrawn amount.
The credit card statement for the next month will show this advance fee. It should be considered that interest charges are being accrued at a rate comparable to the rate applied to the amount withdrawn.
Credit Limit and Credit Card Cash Advance Limit Difference
The maximum amount that can be charged to a credit card is the credit limit, just as the maximum amount of cash that can be withdrawn using a credit card is the cash limit. Credit limits also include a cash limit. Banks typically give a cash limit that ranges from 20% to 40% of the total credit limit.
For example, suppose your entire credit limit is Rs. 2 lakh and a credit card can be used to withdraw between Rs. 40000 and Rs. 80000 in cash. Only standard card transactions are permitted to use the remaining balance.
The cardholder is informed of the cash limit when the bank issues the credit card.
The cash limit can differ between cards and cardholders, indicating that it could not be the same for all of a bank’s credit card options. The cash limit is not set in stone and might alter anytime. Depending on the cardholder’s purchasing habits, how much credit has been repaid, and any payment defaults, the bank may decide to change the cash limit. The cardholder will be notified via email or text if there are any revisions.
What is Credit Card Cash Advance Fee?
Every cash withdrawal made with a credit card is subject to a fee known as a credit card cash advance fee, which is normally a percentage of the withdrawn amount.
As a credit card cash advance fee, banks typically charge 2.5% to 3% of the withdrawn amount, with a minimum amount of Rs.300 to Rs.500. The cost will be shown in the next billing statement. The cash advance fee is also subject to a financing charge at the same rate as the withdrawn amount. It will be levied from when the money is withdrawn until the total amount is repaid.
Even if you make many cash advance transactions on the same day, you will be charged for each one based on the withdrawal amount.
Credit Card Cash Advance Impact on Credit Score
Credit rating agencies won’t record it separately when you take cash advances using your credit card. However, if you miss the due date of the amount that’s to be repaid, the card provider could report your missed payment to the concerned credit bureau. Any missed payments could significantly impact your credit score.
So, make timely payments to keep your credit score clean.
Advantages and Disadvantages of Credit Card Cash Withdrawal
Could be an alternative if your debit card isn’t working
Interest will be levied on the transaction
Gives instant cash because ATMs are available around-the-clock
Each transaction will be subject to a cash advance fee.
Adjustable limits are available.
Cash advance transactions are not eligible for credit card reward points.
Drawbacks of Credit Card Cash Advance
Fees: Each time the facility is used, a cash advance fee is assessed, which is followed by finance costs, which are assessed from the date of the transaction until the repayment is completed in full.
Although the interest rate on cash advances is identical to the interest rate on card transactions, the interest on cash advances is levied from the date of transaction until payment is made in full, making it expensive
Reward points: Credit card transactions involving cash advances do not qualify for reward points. Credit card cash withdrawals earn no reward points, no matter how large the transaction.
Interest-free period: Another element that contributes to the high cost of credit card advances is that interest is levied from the transaction date until the balance is paid in full. Cash advances have no interest-free period, and the interest will continue to accrue until you repay the entire amount owed.
While it is possible to withdraw cash with your credit card, you should only do so on occasion. Unless necessary, you should avoid making credit card cash withdrawals, especially because of the high interest that’s levied on cash withdrawals. Also, a point to note is that cash advances do not have an interest-free period, making them much more expensive.
FAQs on Credit Card Cash Withdrawal
Q1. When and how should the amount of money withdrawn be repaid?
Ans: You must pay back the money that was taken once you pay your statement. There is no requirement to pay it in cash; it can be made via UPI, DD, internet, etc.
Q2. How can I determine my credit card’s cash withdrawal cap?
Ans: The welcome kit you receive with your credit card or the terms and conditions of your credit card will both mention the cash withdrawal cap. Alternatively, you can also use the credit card’s online banking to find out the total and available cash limit. In any case, you can contact customer service for the same thing.
Q3. Is it advisable to make a credit card cash withdrawal?
Ans: Cash withdrawals from credit cards should be your last resort. It’s always better to use debit cards for ATM withdrawals.
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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.
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