Don’t let cash withdrawals on your credit card become a costly affair

D

Your credit card doesn’t work like your debit card.

Withdrawing cash from an ATM seems a normal thing to do. But the road to credit cards often run deeper than just that because withdrawing from a debit card does not work the same as withdrawing from a credit card. Although the transaction process is the same as your debit card, there are certain fees and charges that come attached to withdrawing money from a credit card. Let us help you understand how withdrawing cash from a credit card is vastly different from a debit card.

What is Credit Card Cash Withdrawal?

The credit card cash withdrawal feature, technically known as credit card cash advance, allows you to withdraw cash using your credit card at an ATM. This does not involve any documentation or approval from a bank as it is a feature that comes with your credit card. The cash withdrawal feature may not be available on all credit cards, and the withdrawal limit and charges may differ from bank to bank.

Credit Card Cash Withdrawal: Fees and Charges

Withdrawing cash using your credit card is generally discouraged by banks since you are borrowing hard cash. For that reason, there are certain fees and charges associated with credit card cash advance.

Cash Advance Fee

The cash advance fee is the transactional fee that a card issuer charges you for every transaction you make using your credit card. Typically, most credit card issuers charge either a certain percentage of the cash advance or a flat fee. Top banks typically charge about 2.5% as a cash advance fee, subject to a minimum fee ranging between INR 250 to INR 500. Here’s a list of some of the popular banks along with their interest rates.

  • HDFC – 2.5% of withdrawal amount subject to a minimum of INR 5001
  • SBI – 2.5% of withdrawal amount subject to a minimum of INR 3002
  • ICICI – 2.5% of withdrawal amount subject to a minimum of INR 2503
  • Axis – 2.5% of withdrawal amount subject to a minimum of INR 2504
  • Kotak – INR 300 per withdrawal amount of INR 10,0005

Finance Charges

Withdrawing money at an ATM using your credit card also attracts finance charges just like regular credit card transactions. These interest charges differ from bank to bank and will be communicated to you at the time of issuing. Top banks typically charge between 2.95-3.5% as finance charges for cash advances. Some of the finance charges for the most popular banks are listed here.

Card IssuerMonthly ChargeAnnual charge
HDFC3.49%41.88%
SBI3.35%40.2%
ICICI2.95%41.75%
Axis3.25%46.78%
Kotak3.5%42%

Pros & Cons of Credit Card Cash Withdrawal

While there are pros and cons to withdrawing cash from a credit card, let us explore both sides of the coin.

Pros of a credit card cash withdrawal

  • Instant cash during emergency situations
  • No approval or documentation required
  • No restrictions on how you have to spend the cash
  • Quicker option compared to a personal loan

Cons of a credit card cash withdrawal

  • Incurs relatively high charges for making a transaction
  • No interest-free or grace period
  • No reward points will be awarded
  • Interest on cash advances will be charged from the date of transaction till the payment is made

Now that we have explored all that’s there about cash withdrawals, let’s address some of the frequently asked questions that are always at the back of our minds.

Frequently Asked Questions

Can I avoid paying a cash advance fee?

No, the best way to avoid paying a cash advance fee is to avoid taking a cash advance. If you can’t avoid making a cash advance transaction, then you can try minimising the amount that you withdraw. Another step you can take to minimise the charges is to repay the borrowed amount as soon as possible. Since there is no grace period for a cash advance, interest starts building from the moment you make a transaction.

What is the credit card cash withdrawal limit?

The maximum amount you can withdraw using your credit card is not the same as your credit limit. The cash limit is typically a certain percentage of the credit limit. Banks communicate the cash limit at the time of card issuance as it differs from case to case.

How to withdraw cash at an ATM using my credit card?

You can withdraw cash using your credit card, the same way you would withdraw funds using your debit card. The only difference is the fees and charges associated with a credit card for every transaction at an ATM.

Can I withdraw from any ATM?

Yes, you can withdraw cash at any bank ATM. However, the cash advance fee may vary across different ATMs.

Will my credit score get affected if I get a cash advance at an ATM?

No, your credit score only gets affected for untimely payment, high credit utilisation ratio, and other such factors.

Now that you’ve become a master of cards, be sure to use them wisely to avoid letting them rule your wallet.

Your sidebar area is currently empty. Hurry up and add some widgets.