Credit Card Cash Withdrawal - Charges, Interest rates, Limit
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26 JULY, 2023

Credit cards have changed the way we manage our finances during financial crises. Having a credit card allows you to make purchases without paying any interest unless you miss your payments. It is the best option to manage your finances if you use them wisely. It comes with maximum reward programs, cashback, and bonuses that you can avail of while making transactions through your credit card.

Furthermore, a credit card also allows you to opt for cash advances or credit card cash withdrawal. You can access cash instantly to meet your requirements, and you do not have to get any approvals from the bank or submit any documents.

What Is Credit Card Cash Withdrawal?

Cash Advance is the technical term used to withdraw cash from your credit card at an ATM. Credit cards are mainly used to make purchase transactions. Credit card cash withdrawal is an additional feature offered by the bank. Getting cash from your credit card comes with a cost. You are allowed to withdraw liquid cash within permissible limits and repay the same along with interest.

It is worth noting that not all banks offer cash advance facilities. The permissible limits for cash withdrawal vary across credit cards. When you withdraw cash from your credit card, you will need to incur credit card cash withdrawal charges. As a credit card user, you will need to be aware of such things applicable to your card.

What Is The Permissible Cash Withdrawal Limit?

You can withdraw cash from your credit card limit via an ATM. Out of your total credit card limit, your issuing bank may assign a particular cash withdrawal limit on your card, which generally ranges between 20% to 40% of your total limit.

Your credit limit is the maximum amount allowed to use with your credit card, whereas a cash advance limit is the maximum amount you can withdraw using your credit card. For instance, if you have a credit card that has a limit of Rs. 50,000/- then you are eligible to withdraw up to Rs. 10,000/-. The remaining Rs. 40,000/- can be used to make purchase transactions.

Advantages Of Withdrawing Cash From Your Credit Card

  • The benefit of a credit card cash advance is that you can access instant cash. As ATMs are available 24/7 in all corners of the country, you can have access to cash at any time across India.
  • Unlike other forms of credit, you do not get approval from the bank. Also, there is no documentation involved to avail of such benefits. You can use your credit card at any ATM to withdraw cash.
  • You can increase your credit card limit if you ensure to keep a decent track record without any late payments or defaults. Once the bank increases your card limit, your cash limit will increase automatically.

Disadvantages Of Withdrawing Cash From Your Credit Card

  • Every time you use your credit card to withdraw cash from any ATM, a cash advance fee will be levied. You will also have to pay finance charges which will be compounded from the date of the transaction till you have paid the amount in full.
  • The interest rate on cash withdrawal is similar to that of purchase transactions. It is charged from the date of transaction till the amount is paid in full.
  • The credit card withdrawal is not eligible for any reward points. Regardless of the size of the transaction, you will have to incur interest from the date of the transaction till it is paid off in full.
  • There is also no interest-free period on cash advances. The interest rate will continue to pile up till you repay it.

Credit Card Cash Withdrawal Charges

Banks usually apply credit card cash withdrawal charges ranging from 2.5% to 3% of the withdrawn amount, with a minimum fee requirement of around Rs. 300 to Rs. 500. Additionally, it's crucial to be aware that the cash advance fee also accrues interest charges at a rate comparable to the interest applied to the withdrawn amount.

Interest Charges on Credit Card Cash Withdrawal

Interest charges on credit card cash withdrawal are typically higher compared to other transactions. Interest starts accruing immediately when you withdraw cash using your credit card, with no grace period. The interest rate for cash advances is often higher than the regular purchase APR, and additional fees may be associated with the cash advance. It's essential to check your credit card terms and conditions to understand the specific interest rates and fees applicable to cash from credit card.

How To Withdraw Cash Using Your Credit Card?

The process of withdrawing cash from credit card is similar to that of your debit card. You will need to visit your nearby ATM with your credit card and swipe/insert to withdraw your preferred amount.

Credit card cash withdrawal can be done from any ATMs of your issuing bank. However, it is worth noting that your bank may charge your fee for withdrawing cash from other bank ATMs. Your bank may also put a cap on the minimum and the maximum amount you can withdraw per day.

While applying for a credit card, make sure to know the terms and conditions of using your credit card. Be aware of the fees and other charges involved before availing of a cash advance facility. Furthermore, It is imperative to know the available cash limit on your credit card to avoid withdrawing over the limit. If you withdraw cash over the permissible limit, you will have to incur an over-limit fee along with interest charges.

Final Word

It is advisable to avoid using your credit card to withdraw cash unless it is necessary. Cash withdrawal can increase the total cost of borrowing with cash advance fees and other charges. The downside is that the interest rate keeps piling up until the amount is repaid in full. Also, having outstanding dues and non-payment of the same negatively affects your credit score.

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Frequently Asked Questions

How much cash can I withdraw using my credit card?

After you get the idea of “How can we withdraw cash from credit card.”

It is simple to understand the withdrawal limit, typically calculated as a percentage of your total available credit limit. For example, if a bank offers a cash advance limit of 40% and your credit card limit is Rs 1 lakh, you can withdraw up to Rs 40,000. It's important to note that the cash advance limit is separate from the overall credit limit and may have different terms and conditions, including potentially higher interest rates and fees.

What fees are associated with credit card cash withdrawals?

A Credit card cash advance fee imposed by banks typically range from 2.5% to 3% of the withdrawn amount, with a minimum price of Rs. 300 to Rs. 500.

It's important to consider that the cash advance fee also incurs interest charges at a rate comparable to that applied to the withdrawn amount.

Is it a good idea to use my credit card for cash withdrawals?

While taking a cash advance may not directly impact your credit score, the substantial fees and credit card cash withdrawal interest associated with such withdrawals can result in higher monthly payments.

Failing to pay at least the minimum required amount can harm your credit score. Therefore, it is crucial to make timely payments to avoid any adverse consequences.

How do I know the cash limit on my credit card?

The credit card cash withdrawal limit assigned to your credit card can typically be found in the welcome kit or detailed within the terms and conditions provided with the card.

Another way to determine your total cash limit and available cash limit is by accessing your credit card net banking account. Within your account, you should be able to view the specific details about your cash limit.

How to Repay Cash Withdrawal From a Credit Card?

It’s pretty easy to understand how to repay cash withdrawal from credit card, Simply make a repayment on your credit card using cash or cheques, and you can visit the nearest branch of your credit card provider.

At the branch, you can pay in person by providing the necessary cash or issuing a cheque to cover the outstanding amount on your credit card. The bank staff will assist you in completing the payment process and provide a receipt as proof of payment.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.