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Credit Card Cash Withdrawal: A Brief Overview

Credit cards changed the way we borrow money. It boasts of many features, one of them being credit card cash withdrawal. It provides instant liquid cash to the cardholders, making it a useful feature to those in urgent need of money. Read on to know more.

What Is Credit Card Cash Withdrawal?

Typically, credit cards are used for card transactions. However, certain banks allow their cardholders to withdraw cash using their credit card at the ATM. The cardholders can withdraw cash within permissible limits, and they need to repay with interest and other charges. 

Not all cards will have this feature, so you need to check with your bank about the credit card advance facility. If you have this feature, check the permissible limit for the cash withdrawal.

Charges Associated with Credit Card Cash Withdrawal

  • Cash advance fee: This is the fee charged every time you withdraw cash using your credit card. It can range between 2.5%-3% and is reflected in the billing statement.
  • Finance charges: Just the way credit card attracts finance charges, credit card cash withdrawal charges will be applicable. The charge is levied from the date of the transaction until the repayment date.
  • Interest: The interest is charged on a monthly percentage rate and typically ranges from 2.5% to 3.5% per month. The interest charges start accruing from the day of the transaction until it is paid back in full.
  • Late payment fee: There will be late payment charges on the outstanding balance if you do not pay the full amount.

Pros of Credit Card Cash Withdrawal

  • No Documentation and Approval: Cash withdrawal using credit cards is just like taking a loan from the bank. The difference is that you don’t need any sort of documentation or approval to take out the cash.
  • Instant cash: You can get instant cash in a liquid form when you withdraw money using a credit card. Since ATMs are accessible 24X7, you can avail of this facility whenever you need cash.
  • Flexibility & Flexible limits: If you have consistent spending patterns and a good track record without late payments, you will be eligible for a higher cash limit.

Cons of Credit Card Cash Withdrawal

  • Fees and Charges: Every time you withdraw cash using your credit card, a cash advance fee will be levied. Other finance charges will also be imposed until you repay in full.
  • Interest Rates: You will be charged the same interest for using a credit card at ATM as compared to using it to buy something online. However, the difference is that in case of cash withdrawal, the interest will be charged from the date you withdraw until you make the full payment
  • Reward Points: You won’t be eligible for any reward points, no matter how big the transaction is.

Other Things to Know

  • No Interest-Free Period

When you swipe your credit card or use it to shop online, you usually get an interest-free period before you need to repay the borrowed amount. If you fail to pay, an additional penalty will be charged. That’s why you need to use your credit card wisely.

However, when you withdraw cash using your credit card, there is no interest-free period. The interest will be levied the moment you withdraw cash, thus increasing the final payable amount.

  • Impact On Credit Score

There will be no effect on your credit score as long as you make timely payments. However, due to high interest rates and additional fees and charges levied on credit card cash withdrawal, it may get difficult to keep up with the monthly payments. Your credit score will get affected if you fail to pay even the minimum amount due. 

Final Thoughts

This is a good feature to have extended to your credit cards as it will help you address your sudden cash needs quickly. However, choose a card that gives you numerous benefits such as a low transaction fee.

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