Credit Card Cash Withdrawal Charges

Understanding the Cash Advance Feature

Credit Card Credit Limit Vs Cash Withdrawal Limit

Every credit card comes with a cash withdrawal limit, which is a percentage of the total credit limit. This means that even if you have a high credit limit, the cash you can withdraw could be way lower. Ensure to check this limit before withdrawing.

Credit Card Cash Withdrawal Charges

Banks charge many fees and charges when you withdraw cash using a credit card. So, it’s important to be aware of all these fees and charges because they tend to add up very fast.

Cash Advance Fee

This is a One-Time Charge every time you withdraw cash using your credit card. It is usually a certain percentage of the amount withdrawn, mostly 2% to 3%. Suppose you withdraw ₹10,000 and your card charges a 2.5% cash advance fee; you will actually pay ₹250 just for this transaction.

Interest Rates on Cash Withdrawals

Unlike regular credit card purchases, where you get up to 45 days of interest-free period to repay the amount, cash withdrawals start accruing interest immediately. Normally, the interest rates for a cash advance are higher than those charged on purchases— sometimes as high as 2.5% to 3.5% a month, compounding to 30% to 42% per annum. This means, the longer you take to repay the cash withdrawn, the more expensive it will be.

How Interest is Calculated on Cash Advances

Interest on Cash Advances is charged on a daily basis, from the date of withdrawal till the full amount is repaid. For example, if you withdrew ₹10,000 at a monthly interest rate of 3% (0.1% per day), and you repay this amount after 30 days, the interest is done like this:

• Daily Interest = ₹10,000 x 0.1% = ₹10
• Total Interest for 30 Days = ₹10 x 30 = ₹300

So, in addition to the ₹10,000 you withdrew, you have to repay ₹300 in interest, plus the initial cash advance fee.

Additional Hidden Charges to Be Aware Of

Apart from the various fees and interest rates, some credit cards could have additional charges on cash withdrawal. For instance, you may incur ATM fees if you used an ATM that is not part of your bank's network. Another charge you need to be aware of is if you withdraw cash over and above your cash withdrawal limit. It’s wise to check all Cash Withdrawal related charges before you put that credit card into that ATM machine.

Here is a list of few other charges related to credit cards.

Credit Card Cash Withdrawal Charges Across Top 10 Banks in India

Disclaimer: The features, fees, and all other information specified above are as of when this page was written and are subject to change. For exact information, contact the bank or refer to their website.

Differences Between ATM Withdrawals and Credit Card Purchases

Cash withdrawals are nowhere similar to your credit card purchases. They don’t even earn you great reward points or cashbacks. If you are thinking about withdrawing cash with your credit card, consider these points:

Cash Withdrawals Are Expensive

• Immediate Interest Accrual: Cash Withdrawals are treated as cash advances from the moment one withdraws and thus attract cash advance fees and higher interest rates.
• No Grace Period: Unlike regular purchases, there's no interest-free grace period for cash advances.
• Overall Cost: Withdrawing cash through a credit card involves considerably higher costs compared to transactions involving purchases.

Impact of Cash Withdrawal on Credit Score:

• Negative Signal: Frequent cash withdrawals can signal financial distress to lenders.
• Possible Lower Score: Regular use of cash advances can lead to a lower credit score, affecting your ability to get loans or credit in the future.

How to Minimize Credit Card Cash Withdrawal Charges?

Cash withdrawal through a credit card is expensive, but should you find yourself resorting to this, there are ways to keep the charges to a minimum. Here are some ways to get the most cost-effective deal:

Repay Quickly

One of the best ways to reduce the cost of a withdrawal of cash is to pay it off as soon as possible. Interest will start to accrue just after the money is withdrawn, so the longer you take to repay it, the bigger the debt will accumulate. The way to minimize interest charges and not to contribute to the increase in the balance is to pay the balance quickly—in fact, in a few days. Here are the different Credit Card Bill Payment options across banks in India.

Get a Credit Card with a Lower Cash Advance Fee

While yes, most credit cards charge a cash advance fee, there are ones with lower fees, which can save you money if you need to ever use this feature. If you think you will need to make cash advances with any frequency, consider one of these as an alternative to a normal card with generally lower cash advance fees or even one with a promotional lower rate on cash advances. It's worth looking at and considering the better choices you could make for this purpose.

Consider Alternatives to Cash Withdrawal

First look for other options that could be cheaper than cash withdrawal from a credit card. For example, in an emergency money situation, use a debit card to withdraw cash out of a bank account and avoid paying the exorbitant credit card advance rates, which in turn come with high fees. Short-term personal loans could also be an alternative or even taking an advance from friends or family, which is more likely to incur fees at a lower rate or even no fee compared to that of a cash advance.

Frequently Asked Questions: