While using the cash advance feature, it is essential to consider the credit card withdrawal charges. This feature comes in handy during a financial need. You don’t need approval for making a cash advance.
However, there are several charges associated with the cash advance process. While it can provide funds instantly, the costs may outweigh this benefit. By understanding how the cash advance process works, you can make an informed decision about whether it’s the right choice for you.
What is Credit Card Cash Withdrawal?
Credit card cash advance is another term for the credit card cash withdrawal facility. Cash limit is included in the credit limit available on a credit card. This facility allows you to withdraw cash and you have to pay interest and other related charges while repaying the amount.
The process of withdrawing cash using a credit card is similar to a debit card. All you need to do is visit the nearest ATM and swipe your credit card. Different banks have different credit card withdrawal charges.
It’s vital to understand the differences between cash limit and credit limit; this will give you an idea how a cash advance works:
| Credit Limit | Cash Limit |
| It is the maximum amount you can spend for purchases and cash transactions | This is the maximum amount you can withdraw |
| Credit card has an interest-free period, which ranges from 20 to 50 days | Interest starts accruing as soon as the cash withdrawal takes place |
| The credit limit is decided based on your income, age, job, and other factors | Cash limit is usually 20% to 40% of the card limit |
| Credit limit is a must-have on every credit card | Cash limit is only offered to eligible cardholders |
Charges Related to Credit Card Cash Withdrawal
This can be ideal option since it provides instant funds during an emergency, as it doesn’t require additional paperwork. Here’s what you should know before you avail this facility:
| Cash Advance Fees | The cash advance fee can range from 2.5% to 3% of the amount you withdrawn, with a minimum fee of ₹250 to ₹500This will be reflected in your billing statement |
| ATM Charges | Usually, there is additional fees levied by the ATM operatorYou are generally allowed 5 free transactions though this may vary based on your location and card issuer |
| Finance Charges | An interest rate also applies to cash advances of 3.5% to 4.7% per month The rate may be the same as the interest applied to overdue balance or may be higher |
| Charges Due to Late Payment | Upon defaulting on repayment, you’ll need to pay a late payment fee along with the interest on outstanding amount This fee typically ranges from 15% to 30%, depending on the credit card issuer |
Repeatedly withdrawing cash from an ATM can burden you with extra interest charges and added fees. Such penalties add significant financial strain, especially when repaying a cash advance, as they increase your overall debt. It’s crucial to stay aware of payment deadlines to avoid these extra costs and maintain your financial health.
Also remember that using the cash withdrawal facility increases your credit utilisation ratio, which can negatively affect your credit score.
Advantages of Withdrawal Charges
The cash advance feature on credit cards comes with both pros and cons. The key benefit of credit card cash withdrawal is that it has a straightforward process. Here’s a detailed look at the advantages:
- No need for documentation or any other approval from the bank to make a cash advance
- Allows immediate access to cash when you need it, making it a convenient option especially during a cash crunch
- Allows you to withdraw cash directly from ATMs, providing greater accessibility
- Allows you to pay bills for medical expenses, urgent repairs and more
- Allows you to access funds if you have available credit limit on your card
Credit Card Cash Withdrawal Alternatives
While cash advance can be a boon during a financial emergency, always consider the below alternatives as these options can help you access quick funds without getting charged a high interest rate:
- Credit Card Loan: Take a loan through your credit card, which can be approved up to your existing limit
- Personal Loan: Apply for a personal loan since it allows you to borrow funds without any collateral at affordable interest rates
- Secured Loan: If you need a large amount, opt for a loan by pledging any asset as security
- Salary Advance: If you’ve been at a job since a long time, you can ask your employer for an advance on your salary
Now that you know what a cash withdrawal entails, you can make a mire informed decision about it. To increase your spending ability, get the right credit card. Choose the One Credit Card not only for the OneCash feature that allows you to get an easy cash advance, but also for its great deals across categories like travel, electronics, dining and more.
You can also earn 5X points on your highest spending categories each month. The One Credit Card App also makes it easy for you to stick to your budget by setting spending limits and makes timely repayment easier. Apply now and enjoy the benefits at your fingertips.