Just about everyone has a credit card to pay for purchases. But what about withdrawing cash from your credit card? Does everyone do it? Not really. Let’s take a good hard look at Credit Card Cash withdrawal – and understand the whole thing better.
Credit Cards are an easy way to pay for purchases. They are like mini credit facilities – where you can buy things that you pay for later. Several cards have cash components – which give instant liquid cash to card holders. It is an additional feature offered by banks on a credit card. But is it a good idea to withdraw cash on a Credit Card?
Credit Card cash withdrawals are easy. No fuss. And instant. You just go to an ATM and take the cash that you need, within the allocated limit. It doesn’t need any special approval from the bank or anything. And you pay it back along with the charges that come with cash withdrawals.
Credit and Cash limits on cards
Every card has a credit limit – that is the maximum amount that can be spent on that card. This has been set by the bank based on a person’s income, his credit worthiness and repayment capability. And there is a fixed cash limit on a card as well. This varies from card to card and from customer to customer. It can be changed at the discretion of the Bank at any time as well. A card holder cannot withdraw more than the specified limit. The credit and cash limits will be communicated to card holders when the card is being issued.
How to withdraw money from a credit card
You can withdraw money from a credit card in a few easy steps –
- You go to an ATM.
- Insert your credit card in the machine.
- Put in your PIN.
- Withdraw cash as per availability.
Cash Advance Fees
When a person draws cash on a Credit Card, it attracts a fee which is called the Credit Card Cash Advance Fee. This fee, which is a percentage of the amount withdrawn, will appear in the next billing statement, along with the entire amount withdrawn and interest levied on the withdrawn amount. Each time a person draws cash on a Credit Card, the fee will be charged – even if you draw cash multiple times on the same day.
Interest on Credit Card Cash Withdrawals
Cash advances on credit cards also attract interest, apart from the cash advance fees. The interest is a monthly percentage rate that is levied from the date of the transaction to the date the repayment is made in full. Most banks typically charge a rate of interest of 2.5% to 3.5% per month on all cash advances. This varies from bank to bank.
Over the Limit fees
It is important to know how much your cash limit is – and withdraw only within those limits. If you exceed the limit for some reason, an Over the Limit charge will be charged.
Some pointers –
- You can withdraw cash from any ATM – but it is better to stick to your own card’s bank ATM to avoid any extra charges.
- There may be a cap on the amount of cash you can withdraw in a day. You should find that out before you withdraw cash.
- Withdrawing cash from a Credit Card won’t affect your credit rating or score – but your repayment pattern will. So if you withdraw any cash, make sure that your repayment is above par so that you don’t attract enormous charges and your credit rating is unaffected.
Advantages of Credit Card Cash Withdrawal
- You get instant cash when you need it.
- No documentation or prior approvals are required.
Disadvantages of Credit Card Cash Withdrawal
- Each time you withdraw cash, you need to pay the cash advance fee and other charges.
- You pay an interest – charged from the date of your cash withdrawal until you repay it entirely.
- You won’t get any Reward Points on cash advances.
- Partial payments or no payments by the due date may result in interest charges on all purchases in addition to the cash advance fees.
So while a credit card cash advance might look like a very convenient way to get cash, it is expensive and should only be used if there is no other way out.
If you’re having trouble getting cash from a credit card, it’s possible that the transaction put you above your credit card’s limit for cash withdraws, which is known as a cash advance. Many credit cards have an overall credit limit and a separate lower limit for cash advances and checks written from your credit card account.
What is a credit card cash advance
Most credit card companies offer you the ability to use your credit card to take out money through what’s known as a cash advance. Unlike a debit card, however, getting cash with your credit card at an ATM is considered a short-term loan and can be expensive.
Fees for a credit card cash advance
Unlike withdrawing money from a bank account, a cash advance pulls money from your line of credit through your credit card. In addition to repaying the money you withdraw, you’ll need to pay additional fees and interest as well.
The fees for a cash advance can be substantial. Depending on your credit card terms, the company may charge a flat fee for withdrawing money, or they’ll charge you a percentage of the cash advance. Keep in mind, you may incur additional ATM fees as well.
Interest for a credit card cash advance
In most cases, you’ll also commonly pay a higher interest rate for a cash advance than you would for a typical credit card purchase. Unlike other purchases that have a grace period before they start to accrue interest, interest on a cash advance starts as soon as you withdraw your money.
Before considering a cash advance, check your credit card’s terms and policies to find out the credit limit and fees associated with it. Your latest credit card statement will also list the current interest rate for cash advances. You can also contact the company directly by using the number on the back of your credit card.
Learn more about managing your credit cards