Credit cards help maintain our financial situation. Anytime we need urgent funds, we can rely on a credit card. We can make a big-ticket purchase and repay the amount in small instalments using our credit card. A credit card is an essential financial tool that has many use cases. One should know that a credit card can also be used to make cash withdrawals. Most people have never heard about credit card cash withdrawal. They think that cash withdrawals can only be made via debit cards. As a responsible credit card user, one should know the facilities offered by the issuer/bank. Continue reading to understand how to make cash withdrawals via credit cards.
Understanding the concept of cash withdrawal via a credit card
Many credit card issuers use the term ‘Cash Advance’ for cash withdrawal via a credit card. Most people are convinced that cash can be withdrawn from an ATM using their debit card. Contrary to popular belief, one can withdraw money from an ATM using a credit card. Consumers are not bound to use their credit cards for only online payments. When a credit card offers a cash withdrawal facility, it is a bonus for the user. Typically, users can withdraw cash via their credit card up to a certain limit pre-decided by the issuer/bank.
All credit cards do not offer a cash advance facility to customers. Cash withdrawal credit cards are different from normal credit cards. One must consult with their bank to know more about cash withdrawal credit cards. Since there is a separate limit for cash withdrawal on a credit card, one must return the withdrawn amount to the issuer. Usually, interest charges and other fees are applied on cash withdrawal via a credit card. Also, the limitations on cash withdrawal via a credit card can differ from one bank to another. One should refer to the terms and conditions before withdrawing cash via their credit card.
How does the cash advance limit work?
When one purchases via a credit card, the product/service amount is deducted against their credit limit. It helps in increasing the purchasing power of an individual. However, the limit for cash withdrawal is different from the normal credit line. A cash withdrawal credit card comes with two credit lines. One credit line is for making payments, while the other is for a cash advance. Usually, the cash advance credit limit is lower than the purchasing limit of the credit card. When someone withdraws cash from their credit card, they use the cash advance credit line. Again, not all credit card issuers offer two lines of credit.
One may have the maximum credit card limit in India and still fail to withdraw cash if the card doesn’t allow it. Only a credit card that offers a cash advance limit will allow users to withdraw cash. When someone purchases via their credit card, they can repay the amount within the interest-free period. However, cash withdrawal credit cards apply interest charges right away. Therefore, one should consider the involved costs before withdrawing cash via their credit card.
Costs involved in making cash withdrawal via a credit card
One cannot withdraw cash free of cost via their credit card. Several charges are involved in making cash withdrawals via a credit card. Costs involved in making cash withdrawals via a credit card are as follows:
- One has to return the amount withdrawn from a credit card to the issuer.
- For withdrawing cash from a credit card, one has to pay a convenience charge. The convenience charge can be a fixed charge or a part of the withdrawn amount, whichever is more.
- Some credit card issuers ask for a teller fee or a premium fee for making cash withdrawals via a credit card.
- One has to pay interest charges to the bank for making cash withdrawals via their credit card. APR (Annual Percentage Rate) for cash withdrawals on credit cards is usually more than that on purchases.
The costs involved in making cash withdrawals via a credit card will depend on the issuer. Overall, it is a handy facility when one is in dire need of cash. Make sure you analyse the involved cash before making cash withdrawals via credit card. Many banks offer an interest-free period for making a cash withdrawal. One only has to pay the withdrawn amount to the credit card issuer during the interest-free period.
One also has to consider the interest charges before applying for a cash withdrawal credit card. Usually, the monthly interest on cash withdrawal via credit card ranges between 0.75% and 3%. One may have to submit a different application for acquiring a cash withdrawal credit card. Choose an issuer that offers the maximum credit card limit in India!