A quick fix for individuals who need cash for – an unexpected expense or due to a sudden job loss is a credit card. Individuals can head to an ATM and withdraw cash using their credit cards, like debit cards. Many customers may be unaware of cash withdrawal using a credit card. Here they can understand how to use a credit card cash withdrawal facility.
How Credit Card Cash Withdrawal or Cash Advance Facility Work
Customers borrow funds against their credit cards. In technical terms, credit card cash withdrawal is called Credit Card Advance. Cash advances act as short-term loans. Customers can check their credit card statements to know their cash advance limit.
Depending on the card type, customers can use a card at an ATM, issue a convenience check, or use it for bank transfers. Most banks offer credit cards with an ATM cash withdrawal facility.
How To Withdraw Cash Using Your Credit Card
Like debit card users, credit cardholders can withdraw money using the ATM PIN. Visit an ATM and insert the credit card; follow the steps as displayed on the screen and collect the money.
Here are a few important points that customers should be aware of:
- Credit card advance transactions can be completed at any ATM, irrespective of the credit card issuing bank
- Most banks charge an additional fee to use a credit card for cash withdrawals from another bank’s ATM
- There is a minimum and maximum limit for credit card cash withdrawal
- Customers must be aware of the credit card cash limit to avoid additional charges.
Permissible Cash Withdrawal Limit
Banks allocate a certain cash withdrawal limit; cardholders can use their credit card withdrawal facility up to that only. Customers should know that the cash withdrawal limit is assigned as a part of the overall credit card limit. Generally, the limit ranges from 20% to 40% of the total credit limit.
For example, if the credit limit on a card is Rs. 70,000 per month. The card provider can set a maximum limit of Rs. 20,000 that can be utilised for credit card cash withdrawal. The remaining Rs. 50,000 is to be used for purchase transactions. Banks consider customers’ credit profiles, monthly income and repayment capability to set their credit card cash withdrawal limit.
Benefits of Credit Card Advances
Many credit cards come with a cash withdrawal facility; the key advantages of credit card advances include the following:
- Instant cash availability whenever a card holder needs it
- No documentation requirement at all
- No need to worry about prior credit approvals, like personal loans
Cost Involved in Credit Card Cash Withdrawal
Credit card providers charge an additional fee when the customer makes credit card withdrawals. There are different costs involved in credit card withdrawals; all this makes it a costly deal for the customer.
Knowing the fees involved in a cash advance facility helps you use the feature cautiously. Check out the credit card withdrawal fees:
- Cash Advance Fee: It is the fee charged that credit cardholders need to pay every time they use the cash advance facility. It can be somewhere between 2% – 3% of the transaction amount.
- Cash advance APR: Credit card withdrawals attract a higher interest rate than purchases using credit cards. It makes the credit card bill huge due to interest calculation on a daily basis. This fee is applicable if customers make a credit card minimum payment or no credit card payment at all before the due date.
- ATM or bank fee: It is a minimal per transaction charge charged by banks for credit card cash withdrawal at an ATM, say Rs. 15 – Rs. 25 per transaction.
- Late Payment Fee: When a credit cardholder does not repay the credit card bill on or before the due date, they need to pay a late payment fee. Late payment fee is levied on the credit card dues.
Thus, credit cards offer quick access to funds, but at a cost. Understanding crucial aspects concerning credit card withdrawals and using the credit card withdrawal facility wisely is necessary to avoid a debt trap.