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Withdrawing Cash From Your Credit Card? Know The Charges First

Adhil Shetty


Easy liquidity accompanies unpleasant side effects, if you are considering using your credit card to get your hands on some quick cash, we recommend giving this a read before going to the ATM. Here’s a quick tour of various charges associated with cash advances through a credit card:

#1. Interest rate:

While it is common to use a debit card at an ATM, the key difference lies in withdrawing your own money vs borrowing a sum from a card company.

Thus, a debit card transaction involves no interest or transaction charge (up to the prescribed limit); the case is stark opposite if you withdraw cash using your credit card. In fact, you could end up paying an exorbitant interest rate! This is because you are essentially borrowing money from the card company, and just like every other commodity that’s not yours, you have to pay a fee. Thus, it is important to know about the charges levied by the card company before you withdraw any cash.

Usually, there is a permissible credit limit or a maximum amount that you can use for non-cash transactions. Most cards offer a part of this limit to be withdrawn as cash from any ATM.  Even though, the limit varies from card to card, the charges remain similar. Normally, credit card companies allow 20% to 40% of the credit limit as a cash limit which means, if your credit limit is ₹1 Lakh, then you can withdraw  between ₹20,000 and ₹40,000.

#2. Billing date:

In general, the credit card bill is generated at a fixed date comprising all your purchases; and before this billing date, you are given a window of 22 days to pay your outstanding bills or a minimum amount. The 23rd day will be your due date, and the interest will be charged on the outstanding amount only when you don’t pay it by this date.

However, in case of cash withdrawal using credit card, the interest is charged from the day you withdraw the money.

#3. Cash Advance Fee

Pay attention to the terms and conditions about the cash advance fee. This is either charged on the basis of amount(s) withdrawn or a fixed charge per transaction. It can go up to 2% to 3%, or a fixed limit in the range of ₹300 to ₹500 per cash advances, whichever is high.

Let’s look at an assumption to elucidate. Assuming your card has 2.5% as the cash advance fee and suppose you withdraw ₹20,000, then you will pay cash advance fee of ₹500. Apart from this, you will also be charged interest on the amount. Furthermore, the interest charges will start from the day you withdraw the cash until you repay it. The interest charges vary around 2% to 4% per month depending on the card type and company. Check your card’s terms and conditions or charge-sheet to find out the exact interest on cash advances.

The last word:

Considering such high charges are involved, it’s wise to avoid cash withdrawal from your credit card. However, if you really need the money, then you can also try getting a loan against your credit card. It works similar to a personal loan. Furthermore, banks offer pre-approved loan against credit cards and the process is accelerated if it’s the same bank.

The writer is CEO, BankBazaar.com