When you face unexpected expenses or sudden job loss, a quick way to get cash is by using a credit card. Many people may not realize that credit cards can be used to withdraw cash, similar to debit cards, at ATMs. This guide explains how to use the credit card cash withdrawal facility effectively.
How Credit Card Cash Withdrawal or Cash Advance Facility Works
Credit card cash withdrawal, technically known as Credit Card Advance, allows customers to borrow funds against their credit card limit. These cash advances act as short-term loans with immediate availability. You can check your credit card statement or contact your bank to find out your cash advance limit.
Depending on your credit card type, you can withdraw cash at an ATM, use convenience checks, or transfer cash to your bank account. Most banks now provide credit cards with an ATM cash withdrawal option for customer convenience.
How To Withdraw Cash Using Your Credit Card
With an ATM PIN, credit cardholders can withdraw money just like debit card users. Simply visit an ATM, insert your credit card, follow the on-screen instructions, and collect your cash.
Keep these important points in mind:
- Cash advance transactions can be completed at any ATM, regardless of the bank that issued your credit card.
- Banks often charge an additional fee when you withdraw cash from an ATM of another bank.
- There are set minimum and maximum limits for credit card cash withdrawal.
- Be aware of your credit card cash limit to avoid unexpected charges.
Permissible Cash Withdrawal Limit
Your bank sets a specific cash withdrawal limit, which is part of your total credit card limit. Typically, this limit ranges between 20% and 40% of your overall credit limit.
For example, if your credit limit is Rs. 70,000 per month, your issuer might set a maximum cash withdrawal limit of Rs. 20,000. The remaining Rs. 50,000 is reserved for purchase transactions. Banks determine this limit based on your credit profile, monthly income, and repayment ability.
Benefits of Credit Card Cash Advances
Credit card cash advances offer significant benefits, including:
- Instant access to cash whenever needed
- No paperwork or documentation required
- No prior credit approval process, unlike personal loans
Costs Involved in Credit Card Cash Withdrawal
Using your credit card to withdraw cash can be costly due to several fees and higher interest rates. Understanding these charges is essential to use this facility wisely.
- Cash Advance Fee: Typically 2% to 3% of the withdrawn amount, charged each time you take a cash advance.
- Cash Advance Interest Rate (APR): Interest rates on cash advances are usually higher than purchase rates and accrue daily from the withdrawal date. This applies even if you pay the minimum amount or skip payments (credit card payment).
- ATM or Bank Fees: Additional charges of Rs. 15 to Rs. 25 per transaction may be levied by the ATM or bank.
- Late Payment Fee: If you miss paying your credit card bill by the due date, you will incur late fees on the outstanding amount.
Also Read: How to Pay Your House Rent Using Your Credit Card?
While credit card cash advances provide quick access to funds, they come at a high cost. It is crucial to understand the terms and charges associated with this facility and use it responsibly to avoid falling into a debt trap.
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Frequently Asked Questions (FAQs)
Credit card cash advances offer quick access to funds without documentation but come with higher interest rates and fees. Personal loans usually have lower interest rates and longer repayment terms, making them more cost-effective for larger amounts.
The repayment follows your credit card billing cycle. Interest accrues daily from the date of withdrawal until the amount is fully paid. Paying off the advance quickly reduces interest costs.
Yes, most credit cards allow international cash withdrawals at ATMs, but additional foreign transaction fees and ATM charges may apply. Always check with your card issuer before withdrawing cash abroad.
Limit cash withdrawals, repay the amount promptly to reduce interest, use your own bank’s ATMs to avoid additional fees, and consider other financing options if possible.
Frequent or large cash advances can negatively impact your credit utilization ratio and may lower your credit score. Use cash advances sparingly and maintain timely repayments.
