Withdrawing cash from a credit card comes with several side-effects. Experts say though getting the cash is quite easy and convenient, the additional interest and other charges do not make a preferable option.
Credit cards are a blessing in case you are hit with a cash crunch brought about by a variety of reasons. You get access to instant money without any explanation either to your friends, family or the bank. However, if you plan to take out cash from your credit card, that is a totally different story. Not only a steep rate of interest, but you could also end up paying a hefty cash advance fee.
Withdrawing cash from a credit card comes with several side-effects. Along with the interest, other charges like processing fee, cash advance fee, and finance charges also get added. Experts say though getting the cash is quite easy and convenient, the additional interest and other charges do not make a preferable option.
The benefit of credit card is the availability of instant cash, which is accessible anytime anywhere in the country. Further, no approval or documentation is needed, unlike other loans. However, it also comes with various drawbacks and your credit score also gets affected if you fail to pay the minimum amount due.
Know about the charges that credit cards attract while withdrawing cash:
Interest – Interest is charged at the monthly percentage rate decided by the bank at the time of buying the credit card. Interest is levied from the date of transaction till you make the repayment in full. Typically an interest rate of 2.5 per cent to 3.5 per cent per month is charged by banks on all cash advances. This rate varies from bank to bank and also differs from one card to another.
Interest-free period – With cash withdrawal using a credit card, you do not get an interest free period, unlike while you swipe a credit card. Normally credit cards come with an interest-free period of 45 days but on cash advances, the interest piles up till you repay your outstanding amount completely.
Cash advance fee – Every time you use your credit card to withdraw cash this fee is charged. It typically varies from 2.5 to 3 per cent of the withdrawn amount, or a minimum amount of Rs 300 to Rs 500. These charges also vary from one card to another.
Finance charges – Finance charge is levied from the date of withdrawal until the amount is paid back in full. Credit card holders also need to pay a finance charge on cash advance fee at a rate similar to that charged on the withdrawn amount.
No reward points – The reward points that are promised with the use of credit card does not include cash transactions. Irrespective of the transaction amount, cardholders are not entitled to any reward points for credit card cash withdrawals.