Credit card cash withdrawal can be a tempting option when needing immediate funds. However, knowing the implications and credit card cash withdrawal charges associated with this facility is essential.
This article will explore the charges incurred during credit card cash withdrawals, including credit card cash withdrawal charges and minimum payments. Let’s get into the details to make informed financial decisions.
Overview of Credit Card Cash Withdrawal Charges
Credit card cash withdrawal allows you to access cash from credit card limit through an ATM or bank. While the convenience may seem appealing, it is crucial to understand the charges involved. When you withdraw cash using your credit card, you incur credit card finance and cash withdrawal charges.
The credit card finance charges begin accruing from the day of withdrawal and continue until the amount is paid in full. These charges can be significant, as monthly credit card interest rates range from 2.5% to 3.9%. It’s important to note that interest on credit cards is compounded daily, meaning the more extended the cash advance remains unpaid, the more interest you will accumulate.
In addition to finance charges, every cash withdrawal transaction attracts a cash advance fee. This fee is generally a tiny percentage of the withdrawn amount, typically around 2.5% to 3%, with a minimum charge of Rs.300 to Rs.500. It’s worth mentioning that the credit card cash withdrawal charges also incur interest charges at a similar rate to the withdrawn amount. It reflects in the subsequent month’s credit card statement.
Understanding Minimum Payments and Interest Charges
When opting for a credit card cash withdrawal, it’s crucial to understand how it affects your minimum payments and interest charges. It’s important to note that all new purchases made after taking a cash advance will be ineligible for the interest-free period unless the withdrawn amount is paid off in full. This means that any new purchases will also accumulate finance charges from the first day.
Credit card minimum payment is typically a tiny percentage of the outstanding balance or a fixed amount, whichever is higher. However, it’s essential to remember that making only the minimum payment will result in a higher interest burden. The remaining outstanding balance will continue to accrue finance charges, increasing the overall cost of the cash withdrawal.
Impact of Credit Card Cash Withdrawals on Credit Score
While credit card cash withdrawals do not impact your credit score directly, failing to make the minimum payment within the stipulated period can have consequences. Credit bureaus report the overall outstanding amount, including any defaults, rather than the cash withdrawal. Consequently, your credit score may be negatively affected if you fail to pay at least the Credit card minimum payment.
Maintaining a stable credit score requires active management of outstanding credit card balance and timely payments. As long as you stay on top of your financial obligations and clear your credit card dues promptly, your credit score should remain unaffected.
The Pros and Cons of Withdrawing Cash Using Credit Cards
Pros:
No Documentation or Approval Needed: An advantage of cash withdrawal through a credit card is no approval procedures. You can effortlessly obtain cash by swiping your card at an ATM without additional paperwork.
Instant Cash Access: Credit card cash withdrawals provide immediate access to funds, thanks to the availability of ATMs round the clock.
Flexible Limits: Credit cards offer flexibility regarding cash withdrawal limits. Depending on your credit limit and the terms your card issuer sets, you can withdraw more cash than other financing options.
Cons:
Interest Charges from the Transaction Date: A drawback of cash withdrawals through credit cards is that interest accrues from the transaction date until the payment is made in full.
Cash Advance Fees: Every cash withdrawal transaction using a credit card is subject to a cash advance fee. This fee is an additional cost imposed by the card issuer for utilizing the cash withdrawal feature, which can reduce the overall value of the transaction.
Also Read: Cash Back vs Rewards Points
Conclusion
Credit card cash withdrawals can be an expensive solution for immediate cash needs. Understanding the charges involved, such as credit card cash withdrawal charges and minimum payments, is crucial to make informed decisions.
The interest charges and cash advance fees associated with cash withdrawals can quickly accumulate, leading to a substantial financial burden.
