Interest on Cash Withdrawals from Credit Cards: All You Need to Know

Just like debit cards, many credit cards also offer the facility of cash withdrawal or cash advance. During urgent cash requirements, this facility can be a lifesaver. However, it’s essential to know that you need to pay interest on cash withdrawals from credit cards. 

If you are a new user, then you should take your time to learn about the associated fees and charges. With this helpful guide, you can understand about interest on cash withdrawals in depth.

Understanding Cash Advance

You can use the withdrawn cash for a variety of purposes, whether for paying bills, covering emergency expenses, or managing any other unforeseen costs. When you need immediate funds, you can easily visit an ATM that accepts these cards and borrow against your credit limit.  

Typically, you can withdraw up to 40% of your monthly credit limit. If your credit limit is ₹2 lakhs, then the maximum amount you can withdraw from an ATM will be ₹80,000 (₹2 lakh X 40% = ₹80,000). Check the percentage or limit offered by your credit card company and also check if you are eligible for this feature. 

Interest on Credit Card Cash Withdrawals

As mentioned above, you will have to pay interest on cash withdrawals from credit cards. This interest starts accumulating from the day you withdraw the cash and keeps adding up until you pay it all back. So, it’s important to pay off your balance on time each month to avoid high interest costs.

In addition to the interest, here are some other fees and charges you may need to pay during cash withdrawals using a credit card:

• Additional charges to use the ATM
• A percentage of the amount you take out
• A flat fee payable on every transaction
• Specific charges that your issuer applies
• Added fees if you have made the withdrawal from outside of India

Pros and Cons of Credit Card Cash Withdrawals

While this might be a convenient option, it will still attract several changes. To understand the process in detail, follow this table:

Pros of Cash Advance

• Instant Access to Funds: You can get cash within minutes by just going to your nearest ATM.
• Convenience During Emergencies: This feature can come to your aid if you run out of cash during an emergency.
• Easy Access: Unlike other forms of credit, you don’t need to provide any documents or get your bank’s approval to withdraw. If you need cash, you can simply use your card at an ATM and follow the easy instructions to withdraw money.

Cons of Cash Advance

• No Reward Points: While most cards provide reward points on every eligible transaction, you don’t earn any points on cash withdrawals. 
• Added Interest and Other Charges: Whenever you use these cards for cash withdrawals, there will be several charges added along with high interest rates.
• Interest-free Period: Another downside of withdrawing cash with these cards is that you won’t have an interest-free period. The interest starts adding up right away and keeps increasing until you pay off the entire amount.

How to Make Credit Card Cash Withdrawals

You will need to follow these steps to withdraw cash:

• Step 1: Go to your nearby ATM that accepts credit cards
• Step 2: Insert or swipe your card into the ATM machine
• Step 3: Enter your PIN and the required cash advance amount (it should be within the mentioned limit)
• Step 4: Complete the transaction
• Step 5: Collect the cash, your card and the slip

Mistakes to Avoid While Using Credit Cards for Cash Withdrawals

When using a credit card to withdraw cash from an ATM, make sure that you don’t make these mistakes and harm your overall financial profile: 

• Withdrawing Cash Too Often: It’s best to avoid withdrawing cash frequently unless it’s an emergency, as this can lead to extra interest charges and fees. Try to limit your cash withdrawals to prevent unnecessary costs.
• Making Late Payments: Always pay your bill on time. Late payments can result in additional fees and may negatively impact your credit score, making it harder to get credit in the future.
• Maxing Out Your Credit Limit: Avoid withdrawing an amount that is higher than your credit limit, as this can lead to over-limit fees. Staying within your credit limit helps avoid extra charges and maintain a healthy credit history.

If you’re looking for a great credit card option with which you can make cash advances, consider getting the One Credit Card. Its OneCash feature allows you to get access to funds in less than a minute! All you need to do is use the mobile app to select the loan amount, EMI tenure and the bank account where you need the funds deposited. 

Apart from this convenience, you can also track your spending and pay recurring bills with ease with the One Credit Card App. You will also get 5X reward points on your top two spending categories. Apply now to make this stylish eco-friendly credit card a part of your wallet.