What are Credit Card Cash Withdrawal Charges? A Detailed Guide
Credit card companies make it easy to take out cash from ATMs or banks, giving you quick access to money when required. However, to make accurate decisions regarding whether to proceed with cash withdrawals using a credit card, credit cardholders need to consider several important aspects, including corresponding fees, interest rates, potential impact on credit score, credit limit, etc. Credit card charges are perhaps the most critical thing for cardholders as they entail extra costs for them. In this article, we will provide a detailed overview of credit card withdrawal and how it may cost you more than expected.
Table of content
What is Credit Card Cash Withdrawal?
The process by which cardholders may swipe out cash with their credit cards is known as a credit card cash withdrawal or credit card cash advance. Another advantage banks provide to their cardholders is the ability to withdraw cash. This limits the amount of money that can be taken out. A person has to pay back the money plus interest and other fees. It's crucial to recall that not every card has this feature. Additionally, each bank may have a distinct cash withdrawal limit. To gain a thorough understanding of credit card cash withdrawal fees, it is advisable to review the terms and conditions before applying for a credit card.
How to Withdraw Cash Using Credit Cards?
Cash withdrawals made with a debit card and credit cards are quite comparable procedures. To take out cash with your credit card, go to the closest ATM, use your credit card, and proceed as usual. To withdraw cash with a credit card, you can go to any ATM. You should be aware, though, that the fees your credit card issuer charges for using ATMs from other banks may vary. Therefore, it is important to choose wisely.
Difference Between Credit Card Cash Advance Limit and Credit Limit
Cash withdrawals made with a debit card and credit cards are quite comparable procedures. You should be aware, though, that the fees your credit card issuer charges for using ATMs from other banks may vary. When you receive your credit card, you are informed of the cash advance limit, which might vary from one card to another or from one cardholder to another. The bank has the authority to alter this limit at any time based on your credit history, repayment history, and spending habits. For example, the cash limit is 20 to 40%, or ₹20,000 to ₹40,000, if the total credit limit is ₹1,00,000. This means the cardholder is able to spend the remaining ₹60,000 to ₹80,000 by card transactions after withdrawing ₹20,000 to ₹40,000 from the ATM. The following table elucidates the differences between credit card cash advance limit and credit limit:
Credit Card Cash Advance Limit | Credit Limit |
This refers to the limit set for the maximum amount of cash that can be withdrawn using a credit card. | This is the maximum amount a cardholder can spend with their credit card. |
Selective credit card issuers offer this as an additional benefit for cardholders. | Every credit card user is given a credit limit. |
Transactions depend on your credit limit. | You cannot make transactions after exceeding the credit limit. |
Additional fees may be charged by banks for withdrawing cash using a credit card. | Banks do not levy additional charges or penalties for spending within the credit limit. |
Credit Card Cash Withdrawal Advantages
The benefits of the credit card cash withdrawal feature are listed below:
Using a credit card to withdraw cash does not require completing any additional documentation or approval processes.
With a credit card cash withdrawal, you can spend the money in any way you feel appropriate.
Compared to personal loans, this is a quicker and less complicated solution for urgent financial needs.
You can obtain immediate cash to pay for unexpected expenses using a credit card cash withdrawal.
Credit Card Cash Withdrawal Disadvantages
Before considering this feature, you need to also take into account the following drawbacks in addition to the benefits mentioned above:
When using this feature, credit card holders will not receive any reward points.
NBFCs and banks will charge interest from the time you take out cash until you pay back the money.
In the absence of an interest rate, there is no grace period.
The significant additional fees associated with credit card cash withdrawals may raise the amount owed.
Interest Rates for Credit Card Cash Withdrawal
Compared to standard credit card transactions, credit card cash withdrawal interest rates can be very high. Interest is assessed at a monthly percentage rate, starting on the day of the transaction and continuing until the entire amount is paid back. Depending on the bank and even the type of card, the interest rates can vary. They are flexible and may change at the bank's discretion. Interest rates are influenced by several variables, including your card usage, frequency of purchases, and repayment patterns. For instance, a bank could charge a 3.5% monthly interest rate on credit card cash withdrawals, which adds up to 42% annually. Interest rates are important to understand since they may rise quickly if the outstanding balance is not paid off on time.
Finance Charges on Credit Card Cash Withdrawal
Financial costs apply to credit card cash withdrawals or cash advances. Regular credit card purchases have interest rates different from these cash withdrawal fees. Finance costs, which include interest at a monthly percentage rate, arise when cash advances are made. These fees are assessed starting on the day of the transaction and continuing until the entire amount is paid back. Interest rates for cash advances tend to decrease between 2.5% and 3.5% monthly. Interest rates will be provided to you at the time of card issuance and can change between banks and card types. These are dynamic rates that could fluctuate at the bank's whim. The interest rates that pertain to your particular credit card can be greatly influenced by card-specific characteristics, like your usage, frequency of purchases, and repayment patterns.
Cash Advance Fee in Credit Card
The cash advance fee gets evaluated each time you use your credit card to make an ATM cash withdrawal. This cost often varies between 2.5% and 3% of the amount that was withdrawn, with a minimum of ₹250 to ₹500. Your credit card billing statement will show these charges. For example, you would be charged ₹300 if you drew out ₹10,000 and the cash advance fee is 3% with a minimum of ₹300. You will be billed for this cash advance fee on your subsequent monthly statement. Multiple cash advance transactions on the same day result in different costs depending on how much is taken out.
Credit card ATM Withdrawal Charges
Banks will charge different fees for cash ATM withdrawals using credit cards. They charge between 2.5% and 3% of the total, though. This implies that using this feature will result in an ATM withdrawal fee of at least Rs. 300 to Rs. 500 from the bank.
Cash Advance Fee Charged by Top Banks
You can observe the top banks' credit card cash withdrawal fees in the table below:
Credit Card Issuing Banks | Credit Card Advance Charges |
Axis Bank | 2.5% |
Bank of Baroda | 2.5% |
HDFC Bank | 2.5% |
HSBC Bank | 2.5% |
ICICI Bank | 2.5%-3% |
IndusInd Bank | 2.5% |
Kotak Mahindra Bank | 2.5%-3% |
RBL Bank | 2.5% |
Standard Chartered Bank | 3% |
State Bank of India | 2.5% |
Yes Bank | 2.5% |
Top Cards with Lowest Charges
After understanding how to make a charge-free credit card withdrawal, the following table will guide you through a few credit cards with extremely low cash withdrawal fees. This will help you in selecting the appropriate card based on your financial situation:
Credit Card | Cash Withdrawal Charges |
Axis Bank Burgundy Private Credit Card | None |
Axis Bank Magnus Credit Card | None |
Axis Bank Reserve Credit Card | None |
ICICI Emeralde Credit Card | None |
YES Private Prime Credit Card | None |
Kotak Fortune Gold Credit Card | Rs. 199 |
Impact of Credit Card Cash Advances on Your Credit Score
Choosing to take out a credit card cash advance won't have a direct negative impact on your credit score. However, if you fail to utilise this function wisely, it could have an indirect effect on the score. Moreover, your bank will not maintain an independent record of the cash advance from your credit card. Your other credit card charges will be considered in addition to the outstanding balance. Furthermore, the monthly repayment of dues becomes difficult due to the high interest rate and additional costs. Due to a shortage of cash, there may be a possibility of default and missed payments. Your credit score and report may suffer as a result.
Conclusion
You can fulfil urgent financial needs by using your credit card to make cash withdrawals. You can access the funds without having to wait for your card issuer to approve a loan or complete an application, unlike personal loans. Bring the card to the ATM closest to you and take out the amount you need. Additionally, you are free to call your bank if you have any questions about your card's credit card advance payment feature.
FAQ
Q1. How can I withdraw cash from a credit card without charges?
Consider applying for credit cards that don't charge cash advance fees when you want to use your credit card's cash advance feature to withdraw money. By doing this, you may prevent extra withdrawal fees that could raise the amount you pay. By selecting credit cards that don't charge you for cash withdrawals or added charges, you can accrue a low interest rate. Your capability to make on-time debt payments without going into default will be enhanced by this.
Q2. Are any charges levied on credit card cash withdrawal?
Indeed, a majority of banks impose interest rates and cash withdrawal fees on the use of credit cards. The fees that different banks might charge will differ. Before applying, you must thus evaluate the terms and conditions and any other relevant documentation provided by the banks that issue the credit cards.
Q3. What is the cash limit available on credit cards?
The maximum amount you can take out with a credit card is termed the available cash limit. Your card's credit limit impacts the cash advance limit, which may differ between banks. The majority of banks generally place this restriction between 20% and 40% of your entire credit limit.
Q4. What interest rate is charged on credit card cash withdrawals?
Various banks charge different interest rates on cash withdrawals done with credit cards. They often incur interest rates on credit card cash withdrawals ranging from 2.5% to 3.5% per month.
Q5. Can we withdraw cash from a credit card?
Yes, you can use a credit card to make cash withdrawals. However, not all credit card issuers or banks offer this feature. Choose a credit card from a bank that gives this benefit.
Q6. Can I withdraw cash from one credit card?
Yes, you can use a single credit card to make cash withdrawals from an ATM. However, this option is only available if your bank provides this extra credit card perk. Examine your credit card's attributes online before applying to ensure this.
Q7. How can I withdraw money from a credit card with the lowest charges?
To withdraw funds using a credit card with the lowest possible fees, it is important to apply for a credit card with minimal or no cash advance fees. This feature is available on several high-end credit cards, letting you take out any amount without worrying about incurring fees.
Q8. Do I have to pay an additional fee to withdraw cash from my credit card?
No, if your credit card offers this benefit, you don't need to get the bank's approval. You can get cash almost instantly by going to an ATM.
Q9. Do I have to pay an extra fee for withdrawing cash from my credit card?
Yes, to use this facility, the cardholder must pay an extra cost.
Q10. Where is the cash withdrawal transaction mentioned for the credit card?
Your credit card statement reveals the cash withdrawal transaction. It specifies additional fees and charges linked to it.
Q11. When should I repay the withdrawn cash? Do I have to pay it in cash?
The money taken out must be returned when the statement is paid. It is not necessarily required to pay in cash. Payment options comprise demand draft, UPI, and online.
Q12. Do all credit cards have ATM fees?
No, not all Indian credit cards have ATM fees. While some credit cards offer a set amount of free ATM transactions each month, others can charge ATM fees for cash withdrawals. Consult your credit card company to learn about the costs related to Indian ATM withdrawals.
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