Credit card cash withdrawal is also credit card cash advance. It is one of the credit cards features many banks offer on their credit cards. The feature has a lot of advantages. However, it can also be a trap for someone who doesn’t know all the associated charges on credit card cash advances.
This blog will help clear all your doubts about a credit card cash withdrawal, starting from basics to questions such as the pros and cons of cash withdrawal to help you find out if it is the right choice.
What is credit card cash withdrawal?
Credit card cash withdrawal or credit card cash advance, is a credit facility to withdraw cash from an ATM. The respective bank offers this facility to credit cardholders. With this facility, cardholders can withdraw cash just like a debit card. However, the cardholder can only withdraw cash up to a specific limit. One of the essential advantages of this facility is the requirement of no documents or approval from the bank.
Limit in credit card cash withdrawal:
We know that Credit card cash withdrawal allows you to withdraw cash from ATMs. However, a credit card cash advance is a limit that your bank assigns you a particular cash limit which can range from 20 to 40% of your total credit card limit.
The credit card cash advance limit reduces every time you use the card to withdraw cash. However, the limit is restored when the amount withdrawn is repaid in full.
Credit card limit:
The credit card limit is the maximum amount you can spend on your credit card. The credit card limit includes the cash advance limit. Your credit card company sets the credit card limit based on your credit score, income, repayment history and spending patterns.
Factors to consider before withdrawing cash by credit card:
There are various advantages of a credit card cash withdrawal.
- First, you don’t need any Documents Or prior documents approval from your bank for withdrawal. It makes the process relatively smooth. Just as in the case of debit card cash withdrawal, you can visit the nearest ATM and withdraw cash.
- Second, you can avail this facility 24/7. Thus, it can be a saviour at times of financial
emergency. However, you must note that you can only make up the cash withdrawal to a specified amount, so it is not suitable for an urgent large amount of cash requirement.
Drawbacks of cash withdrawal:
One of the significant drawbacks of cash withdrawal is its fees. Before opting for the facility, you should know all the fees and charges to get a fair idea. The fees and charges are given below:
Cash advance fees:
Every time you withdraw cash from the ATM, the bank charges cash advance fees . different banks charge differently. Depending on the bank, it ranges between 2.0% to 3.0% or a minimum amount between INR 100 to INR 500.
The interest rate charged on withdrawal can range from 2 to 4 percent depending upon bank to bank. Interest is charged from the date of transaction till the payment is made in full. Finance charges:
Regular Credit Card transactions attract finance charges, and the same is true in cash withdrawals. The charge is also levied from the date of the transaction up until the repayment has been done.
Late repayment fees:
Late repayment of your withdrawal amount can hurt your credit score. If you do not pay the amount within the stipulated time period, your credit defaults are reported to the credit bureau. Therefore, it is advisable to withdraw cash only if you can repay.
Apart from that, the bank will also charge you with late repayment fees. If you do not repay the total amount, late payment charges are levied on the outstanding balance, which could be anywhere from 15% to 30%.
In this blog, we learned about the basics of credit card cash withdrawal, the pros and cons of credit card cash withdrawal and the limits if you are looking to opt for the facility. However, you should note that, before opting for the facility, you should compare the interest charges and cash advance fees charged by various banks on their credit cards. Also, note that you should only opt for credit card cash withdrawal if you can repay within the time period.