Credit Card Cash Withdrawal:The rapidly growing trend of online shopping has increased the demand for credit cards. The use of cards has made online shopping easier for people. By shopping through this, the cardholder gets many benefits like reward points, cashback and discount on fuel surcharge. Some credit cards are mainly designed to reduce fuel expenses, which give reward points and cashback on fuel purchases. Most people know credit cards for benefits like reward points, cashback and discount on fuel surcharge. Many other features also come with it, about which very few people know. Today we will learn about one of those cash advance option features.
Cash advance option feature is a very special feature of credit card. Users can withdraw cash using this feature of credit card. This feature can prove to be very useful in situations like emergency. However, it is important to note that usually a charge is levied on using this feature of credit card.
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It is important to understand these aspects before withdrawing cash under the cash advance option feature of the credit card.
How much cash can I withdraw?
Cash withdrawal limits are specific to the credit card. The credit profile of the cardholder, the card issuing institution and the specific card type determine the cash withdrawal limit. Banks usually allow a cash withdrawal limit of 20% to 40% of the total credit limit. For example, if your credit card has a total credit limit of Rs 3 lakh, you may be eligible to withdraw cash between Rs 60,000 and Rs 1.2 lakh, which is 20% to 40% of your specified credit limit. The balance of the credit limit is limited to the transactions made using the card.
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Cash Withdrawal Fee
Financial institutions levy transaction fees for cash withdrawals using credit cards. This fee typically falls within the range of 2.5% to 3% of the total cash withdrawn with a minimum fee of Rs 250 to Rs 500, though it may vary depending on the specific card and the bank that issued it. For example, if one withdraws Rs 1 lakh in cash using a credit card, the transaction fee would be between Rs 2,000 and Rs 3,000. Additionally, it is important to note that cash withdrawals from credit cards attract significant interest charges, which can reach up to 3.5% per month. Moreover, these cash withdrawal transactions do not benefit from an interest-free credit period, which means that interest starts accruing immediately from the date of withdrawal.
Therefore, before withdrawing cash from your credit card, it is important to keep two important things in mind. Firstly, interest on cash withdrawals starts accruing immediately after the date of withdrawal. Secondly, such withdrawals are considered as utilized credit, which will increase your credit utilization ratio. As a result, this will reduce your available credit limit.
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Should you withdraw cash from your credit card?
You need to remember that cash advances on credit cards attract interest charges from the date of transaction till the full payment is made, making it costly. Also, unlike regular card transactions, cash advances do not earn any reward points. Additionally, there is no interest-free period for cash advances, which means interest will keep accumulating until the outstanding amount is fully repaid.Thus, while the cash advance option can be extremely beneficial in times of emergency if used judiciously, make sure to pay your bill immediately if you have availed this service, or pay the bill before the due date if possible.
