Credit card cash withdrawals, also known as cash advances, allow you to access cash instantly against your available credit limit, making them a handy option in emergencies. However, this convenience comes at a steep cost due to high fees and interest rates.
Let’s dive into what you need to know about credit card cash withdrawals, including limits, charges, interest rates, and the pros and cons of using this feature.
What Is Credit Card Cash Withdrawal?
Credit card cash withdrawal or cash advance refers to withdrawing cash against your sanctioned credit card limit at ATMs or bank counters. It allows instant access to money via credit card when funds in a bank account are inadequate or transfers take time.
The withdrawn amount is deducted from your overall card limit and must be repaid as regular credit card spending. However, cash advances attract higher interest charges from the day of withdrawal itself.
What Is The Permissible Cash Withdrawal Limit?
Financial institutions allow withdrawal of 20-40% of the credit limit as cash advances in 24 hours. The actual threshold depends on:
- Card type – premium cards have higher limits
- Overall credit limit sanctioned
- Past usage and repayment history
Further, some financial institutions set an internal limit on the maximum cash that can be withdrawn in a single day or transaction, regardless of the total withdrawal limit available. Check with your financial institution to understand applicable withdrawal limits before taking a cash advance.
Credit Card Cash Withdrawal Charges
Financial institutions levy 2.5-3% cash advance fees on withdrawn amounts (minimum ₹ 200-500). Additionally, cash advances incur interest charges at a rate similar to the withdrawn amount.
Credit Card Cash Withdrawal Interest Rates
The interest rate on cash advances is 3-4% higher than the normal purchase rate, 24-49% per annum. No interest-free period applies. The daily reducing balance method is used for calculating interest. Let’s see this with an example:
Ramesh withdraws ₹15,000 cash on a card with a 40% annual interest rate. If he repays in full only after 60 days, total interest cost = 15,000 x 40% x 60/365 = ₹984.
As is visible, high costs are incurred even over two months due to the lack of payment grace days and very high interest rates.
How To Withdraw Money From a Credit Card?
Follow the below steps to withdraw cash against your credit card:
- Insert your credit card into any ATM and input your PIN
- Select the “Credit Card Cash Withdrawal” option when prompted
- Enter the withdrawal amount within the permissible limit
- Confirm the transaction by re-entering the card PIN
- Collect cash dispensed along with payment slip
Partial cash withdrawals in multiple transactions are allowed and are subject to not exceeding the overall ceiling.
Advantages of Credit Card Cash Withdrawal
Discover the benefits of withdrawing cash with your credit card, including immediate access to funds, flexible repayment options, and enhanced financial flexibility.
1. Instant Cash Access
Withdraw urgently required funds instantly without paperwork or visiting the bank
2. Use Across ATM Networks
Cash can be withdrawn from any ATM regardless of issuing financial institution
3. Avail Higher Amounts
Avail higher withdrawal limits during emergencies, surpassing debit card limits for urgent financial needs.
4. Use Internationally
Enjoy global access to cash, ensuring seamless transactions while travelling internationally.
Conclusion
Credit card cash withdrawal allows instant cash, but it levies hefty fees and steep interest from day one. Hence, limit usage only to true urgencies and repay quickly to minimize massive interest payouts. Consider other cheaper funding options first before taking cash advances. Use this facility judiciously by borrowing only modest amounts for the shortest tenure possible.
FAQs
1. How much cash can I withdraw from a credit card?
As per RBI regulations, you can withdraw 20% to 40% of your total sanctioned credit card limit. Banks may also apply internal caps per transaction.
2. Can I withdraw small amounts multiple times?
You can withdraw cash in multiple smaller transactions but stay within your overall withdrawal limit within a 24-hour.
3. Where can I withdraw from my credit card?
Like a debit card, your credit card allows you to withdraw cash from any ATM. Both domestic and international ATM networks are supported.
4. Is credit card cash withdrawal safer than carrying cash?
Yes, credit card cash withdrawal is safer as it discards the risk of loss or theft. It also allows access to higher withdrawal amounts than traditional ATM debit card limits.
5. How soon should cash withdrawals be paid off?
Repay cash withdrawn as soon as possible, ideally within the billing cycle, to minimize hefty interest charges that apply from day one, unlike average spending.
