Benefits and Drawbacks of Withdrawing Cash from a Credit Card

Like any feature, the cash advance feature has advantages and disadvantages. But when you manage it well, it serves as an emergency fund and comes to your rescue when you’re short on cash. Let’s examine the feature’s advantages and disadvantages in more detail.

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Advantages of the Cash Withdrawal Feature on Credit Cards

Instant cash: The ability to obtain instant cash in liquid form is the main benefit of the credit card cash advance feature. You can always have access to cash because ATMs are available all over the nation, both inside and outside of it, and are open around the clock.

No documentation required: Unlike other credit options, such as personal loans or other loans, the cash advance feature doesn’t need further bank approval, and using it doesn’t require submitting any paperwork. To get cash out of the ATM, all you have to do is use your credit card.

Flexible limits: You may be able to increase the credit limit on your card if you have regular spending habits and a good credit history free of defaults or late payments. Your request to increase your credit limit will be automatically approved by the bank, and your cash limit will increase accordingly.

Payments with credit cards for cash advances

Any payment made toward your credit card will be regarded as a cash advance if the only amount owed on it is cash advance. The payment received will be adjusted in a sequential order starting with the minimum amount due, which includes loan EMIs, all applicable taxes, 5% of the total outstanding; fees and other charges, interest charges, outstanding related to balance transfers, purchases, and finally cash advances. This is because additional expenses such as card transactions, EMIs, balance transfers, and others may be included in the outstanding due. Therefore, you must pay off all of your debts before you can make a payment toward a cash advance.

Cons of Withdrawing Credit Card Cash

Fees and charges: A cash advance fee is applied each time the facility is used, and additional finance charges are assessed from the day of the transaction until the entire repayment is made.

Interest rate: Although the interest rate on cash advances is comparable to that of credit card transactions, the interest on cash advances is costly because it is assessed from the time of the transaction until the entire amount is paid.

Reward points: There are no reward points available for credit card transactions that involve cash advances. For credit card cash withdrawals, you will never receive reward points, regardless of the size of the transaction.

Interest-free period: The fact that interest is assessed on credit card advances from the time of the transaction until the balance is paid in full adds to their cost. Cash advances have no interest-free period, and interest will keep accruing until the balance is fully repaid.

FAQs Regarding Credit Card Cash Withdrawals

Can you get a cash advance on any credit card?

Not every credit card has the cash advance feature available to it. Encouraging the facility is entirely up to the bank. To find out if your credit card has that feature or not, contact your bank.

How can I find out my credit card’s cash limit?

Your credit card terms and conditions or welcome kit will contain information about your credit card’s cash limit. You can also find out your available and total cash limits by logging into your credit card net banking account. As an alternative, you can obtain the information by calling the customer service hotline of your bank.

Can I use ATMs from other banks to withdraw cash?

Yes, you can use any bank ATM to withdraw cash. Nonetheless, the cost of a cash advance may differ between ATMs operated by different banks.

How are cash advance interest rates determined?

Interest on credit card cash advances is assessed at a monthly percentage rate determined by revolving credit, which is comparable to interest on card transactions. Cash advances, in contrast to card transactions, do not have an interest-free period; instead, interest is charged from the time the transaction is made until the full amount is paid.

What is the interest rate on cash withdrawals made with a credit card?

There is an interest fee associated with credit card advances, which varies monthly from 2.5% to 3.5%.

Is taking a credit card cash withdrawal bad?

Although credit card advances do not appear on your credit report, they can lower your credit score if you take out a large amount, which raises your credit utilization rate.

Does using a credit card to withdraw money impact credit score?

Your credit score won’t be impacted directly by a cash advance, but the fee you pay will result in higher monthly payments. Thus, your credit score will drop if you don’t pay the large amount owed.

When must I return the money that I took out? Does it require a cash payment?

The money that was taken out has to be paid back when purchasing the statement. It is not necessary to make the payment in cash. Payments can be made in a number of ways, including demand draft, UPI, online, etc.

Does taking out cash from my credit card require permission?

No, you do not need to obtain bank approval if your credit card has this feature.