A feature of a credit card is that you can make cash withdrawals from an ATM. However, you must be aware that though this facility allows you to access funds immediately, the interest on cash withdrawal from credit card is very high.
Credit cards make it convenient to manage your finances, but to use them effectively, it’s essential that you understand how they work. Withdrawing cash may seem feasible, but it attracts hefty charges in some cases. Make better financial decisions and avoid unnecessary stress by being informed about these costs.
Cash Advance – A Definition
When a credit card is used to withdraw cash, it is called cash advance. It offers flexibility, but it typically comes with additional fees and higher interest rates than regular credit card purchases.
Credit card issuers set a limit for cash advances. When you withdraw cash, you’re borrowing from your credit limit. These are the factors to consider before making a cash advance:
| Withdrawal Limit | Most credit cards allow withdrawal between 40% to 60% of your credit limitThe withdrawal process is similar to a standard ATM transaction, making it easy to access cash when needed |
| ATM Fees | Different ATMs may charge varying fees for credit card cash withdrawalsAlways check the associated fees before completing your transaction to minimise costs |
| Interest Rates | Cash withdrawals often incur higher interest rates than regular purchasesInterest starts accruing immediately, so pay off the amount quickly to avoid falling into a debt trap |
Cash Advance – Use it As the Last Resort
It’s essential to use this feature responsibly, and with caution. Why? It comes with processing charges or ATM fees as well as a higher interest rate. Most cards do not give you any interst-free grace period and you need to start repaying the amount immediately.
So, think of it only during emergencies, and plan your repayment strategy. Here are two essential things to remember when withdrawing cash using your credit card:
| Lower Credit Score | High Interest Rates |
| Cash advances do not directly impact your credit score, but they have a long-term effect on itHigh fees related to cash withdrawals can have an impact on your monthly paymentsFailure to pay the amount due can affect your credit score adversely | All credit cards have additional fees associated with cash withdrawalsUnderstanding how interest on cash withdrawal from credit card can accumulate is vital Make sure to have a prompt repayment plan to avoid accumulating high interest charges |
Listed below are the charges levied by popular credit cards:
| Credit Cards | Cash Advance Interest Rates (per month on the withdrawn amount) |
| Axis Bank | 1.5% |
| Bank of Baroda | 3.6 % |
| HDFC | 3.75% |
| HSBC Bank | 1.99% to 3.49 |
| ICICI Bank | 3% |
| IndusInd Bank | 3.83% |
| Kotak Mahindra Bank | 1.5% to 3.4% |
| RBL Bank | 3.99% |
| SBI | 3.5% |
| Standard Chartered Bank | 1.99% to 3.75% |
| Yes Bank | 3.8% |
Credit Card Cash Advance Alternatives
Learning about other options can help you access quick funds without getting charged a high interest rate. Here are some alternatives for getting quick cash:
| Personal Loan | Personal loans allow you to borrow funds at affordable interest rates The processing time is quick, allowing you to cater to emergencies as well as planned financial requirements |
| Collateral-Based Loan | For a large amount, opt for a loan by pledging any asset as securityThese may include real estate, stocks, and more |
| Salary Advance | You can ask your employer for an advance on your salary If you have a good track record with the company, securing an advance may be a hassle-free way to access instant funds |
| Go for ‘Buy Now Pay Later’ | This option allows you to make a purchase and split the payment into smaller, interest-free instalments This option is usually available at checkout both online and in-store |
If you want to apply for instant credit card, consider the One Credit Card, which has one of the
onboarding processes. Not only does it allow you to take a cash advance with ease via OneCash, but also has many features that make saving money and spending responsibly easier.
The CSB One Co-Branded Credit Card has a cash advance fee of 2.5% of the withdrawn amount and an interest of 3.75% per month. What’s more, you can check your withdrawal limit right on the One Credit Card App.
You can also set spending limits on the app and stick to your budget with timely notifications. Earn 5X reward points on two spending categories each month and enjoy a bevy of offers with this stylish metal credit card. To get started and explore its many benefits, apply now!
