When you require money in a hurry to deal with an emergency or pay bills, you might be curious about whether it’s possible to remove it from your credit card. A cash advance is a common feature offered by many credit card companies. Cash advances do have some disadvantages, even though they can be helpful in a pinch. So it’s important to consider the benefits and drawbacks before you withdraw cash from your credit card.
Cash Advance Fees
When a person withdraws cash from a Credit Card, they are charged a fee known as the Credit Card Cash Advance Fee. This fee, which is a proportion of the withdrawn amount, will be included in the upcoming billing statement, as well as the full amount withdrawn and interest imposed on the withdrawn amount. The fee will be charged each time a person draws cash on a Credit Card, even if you draw cash numerous times on the same day.
How to make a credit card withdrawal
There are a few easy steps by which you can withdraw money from a credit card at various banks like SBI, HDFC, ICICI, Axis, Kotak Mahindra, etc.
- You visit an ATM.
- Insert your credit card into the slot.
- Enter your PIN.
- Withdraw cash as needed.
Interest on cash withdrawals from credit cards
Besides the cash advance fees, credit card cash advances attract interest. The interest is calculated as a monthly percentage rate that is applied from the day of the transaction to the date of full repayment. Most banks charge a monthly interest rate of 2.5% to 3.5% on each cash advance. This varies depending on the bank.
Fees for Exceeding the Limit
It is essential to know your cash limit and to withdraw only within certain limits. If you go over the limit for any reason, an over-the-limit fee will be applied.
- You can take money from any ATM, but it is best to use the ATM associated with your card to avoid any additional fees.
- There may be a daily limit on the amount of cash you can withdraw. You should find out before withdrawing money.
- Withdrawing money from a credit card does not affect your credit rating or score, but your repayment pattern does. As a result, if you withdraw any money, ensure that your repayment is above line to avoid massive penalties and maintain your credit rating.
When Is It a Good Idea to Use a Credit Card to Get Cash?
If you’re in a tight financial situation, withdrawing money from your credit card may appear to be a good option. For example, If your vehicle breaks down and you need to pay a towing company that does not accept credit cards, then it could be your only option. However, if the situation is not critical, you should look into other methods of obtaining cash because a credit card advance can be costly.
Credit card cash advances do have advantages, but again they can be costly when compared to other methods of borrowing money. If you require funds but it is not an emergency, spend some time researching your other choices before being willing to commit to a credit card cash advance. And if you end up withdrawing money from your card, try to repay the balance as soon as possible to minimize interest charges.