Utilising your credit card to withdraw cash can be an expensive venture. Credit card cash withdrawal charges such as cash advance fees, finance charges, interest rates, and ATM fees can drive up your bill amounts. Therefore, gaining a good understanding of these additional charges can allow you to wisely and efficiently make use of your credit card cash withdrawals. When considering a credit card, you might also look into options to apply for a credit card online with instant approval or apply for a credit card in India to ensure you have the best features available.
Additionally, an important aspect of cash withdrawals with a credit card is knowing the cash limit provided by your bank. In most cases, the amount of cash you can withdraw each month from your credit card is limited to a percentage of the card’s total credit limit. Nevertheless, credit card cash withdrawals can be extremely useful for accessing quick funds without any documentation or application forms. To minimise charges while maximising efficiency, evaluate your needs carefully before using your credit card for a cash withdrawal. If you don’t have a credit card yet, you might want to apply for instant credit card to gain access to these benefits swiftly.
Understanding Credit Card Cash Withdrawal Charges
The best way to minimise withdrawal charges on your credit card is to get an understanding of the various ways these charges work. Here is a list of the most important charges to keep in mind:
1. Cash Advance Fee
A cash advance fee is a charge applicable to you every time you utilize your credit card for a cash withdrawal. On average, a cash advance fee ranges from 2.5% to 3% of the withdrawn amount. A cash advance fee is applicable on a minimum withdrawal amount which can range from Rs 250 to Rs 500. If you want to apply for an instant credit card, understanding these fees is crucial to managing costs.
Note: If you withdraw cash multiple times, you will incur a separate fee for each transaction.
2. Finance Charges & Interest
On any type of credit card transaction, a finance charge will apply. A finance charge is incurred on the day of the transaction and is levied until the repayment has been made. For most banks, credit card interest charges for monthly cash withdrawals are 2.5% to 3.5%. In the case of cashless or online credit card transactions, some banks offer an interest-free period, however, this benefit does not apply to cash withdrawals. When you apply for a credit card online with instant approval in India, these terms will be clearly stated.
Finance charges are primarily calculated based on the amount you have withdrawn and the time taken to pay back the amount due. Therefore, the more cash withdrawals you make, the higher your finance charge will be. To avoid paying additional interest rates on finance charges for any kind of transaction, credit card holders should ensure that payments are made on time or within the grace period. If you plan to apply for a credit card in India, consider these charges to avoid unnecessary costs.
3. ATM Fee
One of the easiest pitfalls to avoid on credit card cash withdrawals is the ATM Fee. Most credit card holders will be eligible for 5 free ATM withdrawals in a month. Once a user has exceeded five transactions, they will be charged a small fee per cash withdrawal/advance. To avoid this fee, do optimise your ATM withdrawals.
Note: Using an ATM from a different bank branch can result in an additional fee regardless. It is always best to use your bank branch’s ATM when withdrawing from your credit card.
4. Inadvertently Surrendering Reward Programs
Utilising a credit card for cash withdrawals/advances causes you to miss out on reward programs. Maximising returns via reward programs is a huge selling point of credit cards and a benefit that should not be missed out on. Rewards are offered in the form of points, discounts, gifts, or other deals. Since reward points are so popular and advantageous, certain industries such as travel, retail, and hospitality offer specialized incentives for credit card payments.
For many transactions, credit card holders will be able to accumulate reward points, which can be used to redeem cash vouchers, cash gifts, air miles, and more. Since users cannot avail of these benefits in cash withdrawals/advances, they should look to maximise cashless and online credit card payments.
5. Late Payment Penalties
Late payment of credit card dues can result in penalties. Cash advance transactions already have an interest between 2.5% to 3.5%, this amount can increase substantially if repayments are missed. The total amount you would end up paying in penalties can be anywhere between 15%-30%, or higher.
Not only do penalties increase the amount owed, but they also impact your credit historyand may lower your overall credit score in the process. Therefore, it is advised to pay your credit dues on time or even in advance.
CONCLUSION
Understanding what will incur additional costs can help you minimise credit card cash withdrawal charges. Remember that for any cash withdrawal, you are charged a cash advance fee and a finance charge fee. A cash advance fee is usually 2.5% to 3.5% of the transaction amount. A financial charge is an interest charge applicable for any type of credit card transaction. In the case of cash withdrawals, interest is usually charged from 2.5% to 3.5% on the total cash withdrawn in a month. Missing payment dates for credit dues can be extremely costly and adversely impacts your credit score. Ensure that all credit dues are cleared on time or during the grace period at the latest.
Credit card users can avoid ATM fees by limiting their number of withdrawals in a month to 5 or fewer. However, users should withdraw primarily from their bank branch ATMs, as using other branches can incur a fee. Another way to save costs is to minimise cash withdrawals and focus on cashless transactions. There are many reward programs and reward points on offer that users should try to avail of. Since cash withdrawals don’t offer any kind of reward program, credit users should aim to withdraw with their credit card only when necessary.
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