People use credit cards to make purchases because they can pay the money later. The credit card user also gets various facilities such as zero EMI charges, discount offers, and convenience. There is one more facility, but many of us might need to be aware of it: the credit card cash withdrawal. Yes, you heard it right; you can withdraw cash from a credit card at any ATM.
Read this article to understand the cash in advance feature, how to withdraw some money from a credit card at an ATM, how to transfer money from a credit card, and things to consider before withdrawing cash using a credit card.
What is Cash Advance?
A cash transaction allows you to withdraw money from a credit card. The money withdrawn from the credit card will be part of the credit card balance. The most important thing to understand is that the banker will charge the cash advance fee at the ATM and a higher interest rate on any cash withdrawn.
Usually, the cash advance interest rate is between 20 to 25 per cent APR, and the grace period varies from bank to bank. Pay off the credit card balance in full as soon as possible to reduce the risk of paying high interest on the credit card debt.
Follow these steps to get cash from a Credit Card at an ATM
- Insert the credit card into an ATM
- Enter the credit card PIN
- Select the option “Cash Advance”
- Enter the required amount of cash to withdraw
- Click on the “Yes” option to accept any fees associated with the transaction
- Collect the cash
Follow the above steps to withdraw cash from a credit card at an ATM, which is as easy as using a Debit card.
Steps to transfer the money from the credit card.
To know how to transfer money from credit card to bank account, follow the below steps:
- Log in to the net banking website
- Click on the credit card section on the website
- Choose the transfer option
- Proceed to enter the amount that you wish to transfer to cash to your bank account
- Enter all the details, and the cash will be credited
Difference Between Credit Card Credit Limit and Cash Advance Limit
The credit limit is the maximum amount one can spend on a particular credit card. In contrast, the cash limit is the maximum cash one can withdraw using a credit card. The cash limit usually includes the credit limit on the credit card. Many banks offer 20 – 40% of the total credit limit as a cash limit. For instance, if the total credit limit on a card is Rs. 1 Lakh, then the user can withdraw up to Rs. twenty thousand to Rs 40,000.
Things to Consider before taking cash in advance
There might be some emergency cases, and you may need to take out cash from a credit card. But despite various reasons, pay off cash advances as soon as possible. There are some disadvantages of cash advances. Let us understand some major points.
- Cash advance fees: The bank will charge the user a cash advance fee every time a credit card is at the ATM. As we know, ATM fees are already higher than ever, and paying an additional cash advance fee on your ATM transaction is an extra expense. The cash advance fees vary from one bank to another.
- High-Interest Rates: The cash advance interest rates are higher than the interest rate the credit card issuer charges for purchases, and the cash advance does not have a grace period. The interest starts accruing right from the day of withdrawal.
- Adverse Effects on Credit Scores: By withdrawing cash using a credit card at the ATM will lower the available credit. Hence the credit score will drop. If the balance is not paid, the interest starts to accrue immediately. The credit utilisation rate will rise, and the credit score will come down.
Also Read: How to Chooose Best Cashback Credit Card
A cash advance should always be the last option in an emergency. It is necessary to keep track of all the other options before the credit card cash withdrawal from a credit card at an ATM. Pay off the cash advance quickly to reduce the risk of paying high-interest rates.