Credit cards in today’s time have become as important as carrying cash. Banks have come up with innovative benefits, collaborated with various brands to even offer branded credit cards to customers. The market now categorizes credit cards into lifestyle credit cards, shopping credit cards, fuel credit cards, branded credit cards, and premium credit cards.
In all credit cards, one of the common features is cash withdrawal. From any credit card that you have, you can choose to withdraw cash from it by visiting any ATM. Some banks even entice customers to use a cash withdrawal feature by providing the option of a cheque book as well.
A cash advance of cash withdrawal from a credit card is the transaction where you are obtaining credit in the form of cash. Many people think that cash withdrawal from a credit card is the same as making any purchase from it, but that’s not the truth. In other transactions, you buy either goods or services, but in cash withdrawal, you have bought cash. Banks treat cash withdrawal differently. Around 2% or more fee is charged for cash withdrawal, and some banks also charge a higher rate of interest for cash withdrawals than regular transactions.
Credit Card Cash Withdrawal Vs. Regular Transactions:
Let’s understand the difference between cash withdrawal from credit card and regular transactions:
- Banks like cash withdrawals as they treat it differently from regular transactions. It levies transaction fee for cash withdrawal and not to forget also charges a higher rate of interest than what is applicable for regular purchases.
- Special offers related to interest applicability are likely to be not applicable to cash withdrawal. It means that some time banks may offer certain interest-free periods, but in actuality, that interest-free period would only be for regular transactions and not for credit card cash withdrawal.
- The moment you withdraw cash from a credit card, along with the transaction fee, the interest rate also gets applicable from day one. It means even if you are in a grace period, the moment you withdraw cash interest will apply to it.
- Since the credit card cash withdrawal is considered separate from other transactions, no cashback, rewards, etc. are applicable for it.
The feature of cash withdrawal from credit card should be avoided at all cost. It is because you would have to pay otherwise much-much extra than what you would have used and make extra burden at the time of Credit Card Bill Payment. It increases your cost significantly. Also, the cash can be withdrawn from your debit card from the same place where you would withdraw cash from a credit card. Thus, there are only a few possible situations when you could be forced to make credit card cash withdrawals. These situations are as follows, take note of them and avoid it at all cost.
- When you have forgotten your debit card at home, and haven’t made sure to keep some extra cash with yourself in case of need.
- When you have exhausted the entire balance in your account to which your debit card is linked, and you need something urgent which cannot be purchased through credit card or any other digital payment.
Make sure that you understand the terms of agreement of your credit card related to cash withdrawal before actually doing it. Also, use this feature only in an absolute emergency and repay the amount you withdrew as cash as quickly as possible along with other necessary charges.
Credit Card Cash Withdrawal Charges
Nowadays most people in cities own a credit card. It is highly demanded, and banks are coming up with various offers and rewards to lure customers into availing a credit card. Cash withdrawal from credit cards is one of those features which is available with all credit cards no matter whether they are travel cards or fuel cards or premium cards. However, the treatment of credit card cash withdrawal is not the same as regular transactions that you perform through it.
Banks levy transaction fee on cash withdrawal from credit cards along with a higher rate of interest as compared to regular transactions. Not to forget, if any special offer regarding interest-free period is available then that will only be applicable on regular purchases and not on cash withdrawal. So, even if you withdraw cash during the grace period, the interest will be applicable from day one. In addition, the cashback or rewards are also not applicable on cash withdrawals.
You must make use of the cash withdrawal from the credit card only in case of absolute emergency. If you use this feature for anything other than that, then the cost of it will be significantly high. There will be no benefit that you would be able to use which the card provides; all you would accumulate is the transaction fee and high-interest rate.