Cash requirements are sudden and urgent. While most people use their savings or current account to meet their cash requirements. Some prefer credit card cash withdrawals to fulfill their cash needs. Read this article to find out more about the facility of credit card cash withdrawals.
What are Credit Card Cash Withdrawals?
Credit card withdrawals from ATMs are referred to as cash advances. As you know, the main use of credit cards is to purchase items now and pay for them later. Banks also provide cash advance features in credit cards, using which users can withdraw cash from their credit limit. For this, they usually levy certain credit card cash withdrawal charges.
The availability of withdrawal features differs from bank to bank, and the withdrawal limit and charges vary from card to card. It is crucial to know credit card cash withdrawals are different from the ones done through a debit card.
Credit Card Cash Withdrawals: Factors to Consider
Extra Charges
- Cash Advance Fees: When you use a credit card for a cash advance, it attracts cash advance fees. This fee is a certain percentage of your withdrawal amount and applies every time you make a cash withdrawal. You can see the cash advance fee in your next month’s billing statement.
- Interest Charges: All Credit card transactions have associated interest charges. Therefore, certain interest charges are also levied on credit card cash withdrawals. The charges are levied from the date of withdrawal till the date you’ve fully paid the credit card bill.
The rate of interest varies from bank to bank, typically around 2% – 3.5% monthly. The details of the rates and other charges are usually communicated when the card is issued. Apart from the repayment duration, the type of credit card and the person’s spending patterns are other factors that affect the interest charges.
Credit Scores
Although obtaining a cash advance may not lower your credit score, the high fees connected with cash withdrawals increase monthly expenses. Your credit score could be negatively impacted if you only pay the minimum due.
Reward Points
Most banks provide reward credit cards to help users save and take advantage of other special offers. This encourages cardholders to use credit cards for dining out, traveling, and shopping. And these reward points can be exchanged for gift cards, cash, air miles, and other items. However, it is advisable to use a cash advance when you need money since when you use your credit card to withdraw cash, you might not get any reward points.
Also Read: Top 5 Benefits Of Using Virtual Payment Card
ATM-Related Fees
Credit Card users are allowed to do up to five free ATM transactions each month. And if this ATM transaction limit is crossed, you need to pay an ATM maintenance or interchange fee. Your credit card will be charged for the cost, which will appear on your credit card statement.
Pros & Cons of Credit Card Cash Withdrawals
Now that the pointers mentioned above have laid out the dynamics involved with cash withdrawals via credit card, let’s collate the pros and cons.
Pros
- Quick access to cash
- Don’t require approval or documentation
- Use any ATM to withdraw cash
Cons
- With each withdrawal from an ATM, a person has to pay credit card cash withdrawal charges.
- A Customer has to pay interest on the cash advance from the transaction date till full repayment of the amount. Interest-free grace periods do not apply to this feature.
- No rewards or offers are granted in using the cash advance facility.
Conclusion
You should only use a credit card for cash withdrawals if it is necessary. Because cash withdrawal can bring in additional interest payments and charges.
Also Read: Debit Card vs Credit Card: What’s the Safest Way to Pay?
Finally, the decision to use a credit card for cash withdrawal will require financial literacy along with a correct assessment of the needs of the individual.
