Cash withdrawal is an additional feature of credit cards. It means that in addition to making online payments using your credit card or swiping it in stores, you can make ATM withdrawals also. This facility is called a cash advance. Almost every credit card offers this facility. It is helpful when you need to make a payment in cash.
The credit cardholder can withdraw money at an ATM using their card’s ATM PIN. You can generate the PIN at the ATM if you have not generated it earlier.
However, before you use your credit card at an ATM, you need to know some important things. Let us first know about this facility of cash advance.
The Credit Card Withdrawal Limit
A consumer can withdraw cash up to an allocated limit using their credit card. The bank sets a limit to the cash advance facility from the overall credit limit on the card. Suppose your credit card limit is Rs. 90,000 per month. The bank may set a limit of, say, Rs.30,000 for credit card cash withdrawals. The maximum credit card limit for cash advances varies from bank to bank. This credit card limit is based on the card holder’s credit history, income, and repayment capability.
What to Know Before Swiping Your Credit Card at an ATM
Credit card cash withdrawal using a credit card comes with specific terms and conditions that the user must know. Here are the key factors to consider:
There’s no interest-free period
Generally, you get an interest-free period when you purchase using your credit card at a point-of-sale (POS) terminal or use it to shop online. This period differs for different cards. You will be penalised if you fail to pay the bill within this period.
Customers do not get this interest-free period in the case of ATM withdrawal using their credit card. The lender will levy interest right from the moment you withdraw cash. You do not have any period to repay the borrowed amount without interest. It ultimately increases the final repayable amount.
Different Withdrawal Charges
- Cash Advance: A fee is charged every time the cardholder uses the cash advance facility. The fee can be between 2.5 to 3% of the transaction amount. It is reflected in the credit card bill statement.
- Late payment fee: The fee levied if you do not repay the entire bill. Late payment charges apply to the outstanding amount. It can go as high as 30%. Look for bank credit cards charging a relatively low-interest rate for overdue interest.
- Cash Advance APR: Cash advances include a higher interest rate than purchases using credit cards. An individual can look for an introductory offer on credit cards. The bank may offer no interest on cash advances as the introductory offer for a fixed period, say six months. Later on, the issuer will charge the APR accordingly.
- ATM or bank fee: When the credit card is used for ATM withdrawal, the cardholder must pay a minimal fee. There can be a limit to using this withdrawal facility for free, say ATM transactions; up to 3 transactions can be free.
Credit Score and Credit Card Cash Advances
A credit report does not have a different line for ATM withdrawal using credit cards. But it can harm your credit score if the withdrawn amount is not paid on time. It is the percentage of available credit on the card, hence a part of your credit utilisation ratio. It should not be converted into unmanageable debt as you need to maintain a high credit score to get credit from the bank whenever required.
Benefits of Credit Card ATM Withdrawal
- No requirement of approval or documentation: Other forms of credit, like personal loans, require approval from the bank. A cash advance does not require you to submit any document or get approval for the facility. You need to go to your ATM and withdraw cash.
- Instant cash: One of the key advantages of credit card withdrawal is providing instant funds. As ATMs are accessible 24×7, you can get urgent funds as you can access cash at any time across the country.
- Flexible Limits: The bank can increase your card credit limit based on spending patterns. With an enhanced credit limit, you will have the flexibility to get the required funds.
Thus, you can use your credit card to make urgent withdrawals. You can use it with a little consideration.
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