Credit Card Cash Withdrawal: What Is It?

The technical term for a credit card cash withdrawal facility is a credit card cash advance. At the bank’s ATM, it enables credit cardholders to take out cash using their cards. Since credit cards are usually used for card transactions, the banks also provide a cash withdrawal facility as an extra feature. Cardholders who use this facility may withdraw cash up to the allowed amount and are responsible for paying it back, plus interest and other fees.

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The feature might not be available on all credit cards, and finance fees and allowable cash withdrawal limits might differ from one credit card to the next. Therefore, everyone who uses a credit card needs to be aware of everything that applies to them.

Discrepancy Between the Credit Limit and Cash Limit on Credit Cards

The maximum amount that can be spent on a specific credit card is known as the credit limit, whereas the maximum amount that can be withdrawn with a credit card is known as the cash limit. Usually, a credit card’s available credit limit includes the cash limit. 20% to 40% of the total credit limit is typically offered by banks as a cash limit. For example, if a credit card has a total credit limit of Rs. 1 lakh, you can use the card to withdraw between Rs. 20,000 and Rs. 40,000 in cash. Only use the remaining funds for card transactions.

When a credit card is issued, the bank usually notifies the cardholder of the card’s cash limit.

The cash limit varies from card to card or from customer to customer because it might not be the same for all of the bank’s credit card variations. A given card’s cash limit is not set in stone and can be altered at any time at the bank’s discretion.

The banks have the right to periodically adjust the limits based on a number of factors, such as the cardholder’s repayment behavior, spending patterns, defaults, and other credit data gleaned from credit bureaus. The customers will be informed of any such revisions via emails or messages.

What is the Cash Advance Fee on Credit Cards?

Every time a credit card is used to make a cash withdrawal, there is a fee associated with the transaction. A cash advance fee is applied each time a credit card is used to withdraw cash. This fee usually equals a portion of the amount withdrawn.

As a credit card cash advance fee, banks typically charge 2.5% to 3% of the withdrawn amount, with a minimum charge of Rs. 300 to Rs. 500. The charge will appear on the billing statement for the upcoming month. A finance charge equal to the amount withdrawn is additionally applied to the cash advance fee. It will be assessed starting on the withdrawal date and continuing until the entire amount is repaid.

Finance Fees for Cash Withdrawals from Credit Cards

Finance charges apply to credit card cash advances as well. Interest will be assessed starting on the day of the transaction and continuing until the entire repayment is made. It will be charged at the monthly percentage rate. Interest rates on all cash advances are normally between 2.5% and 3.5% per month from banks.

When the card is issued, the cardholder will be informed of the variations in the rate, which differ between banks and card variants. Additionally, the rates are dynamic and open to modification at the bank’s discretion. Other card-specific factors that influence the interest rates charged on a specific credit card exist in addition to the external factors that influence the overall interest rate on cash advances. These factors include usage of the card, frequency of spends, repayment behavior, etc.

How to Take Cash Out of a Credit Card

Taking out a credit card cash withdrawal is just as easy as taking out an ATM cash withdrawal with a debit card. To access the money, simply walk into any nearby ATM, insert your credit card, and follow the prompts to withdraw cash.

Cash withdrawals using credit cards are possible at ATMs operated by any bank, regardless of the bank that issued the credit card. However, if you use an ATM belonging to another bank to withdraw cash, some banks might charge you a different cash advance fee. A few banks might also set a daily or per-transaction maximum and minimum for the amount of cash that can be withdrawn from ATMs.

Therefore, before using the cash advance facility, you must be aware of the terms and conditions that apply to your card as well as the associated fees and charges. In order to avoid going over the limit, it’s also crucial to be aware of the card’s available cash limit before making a withdrawal. The bank will impose an overlimit fee in addition to the financing charges if the overlimit transaction is approved.

Credit Score Effect of Credit Card Cash Advance

Credit card cash advances won’t be reported to the credit bureaus separately. The total amount owed and the failure to pay it will be reported collectively. Therefore, your credit score might not be impacted by obtaining a cash advance on your credit card. However, you might find it challenging to make the monthly payments at times because of the high interest rates (which accrue daily) and extra fees and charges associated with credit card cash withdrawals.