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Credit Card Cash Withdrawal Charges: A Complete Guide

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Credit Card Cash Withdrawal Charges: A Complete Guide

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A credit card is essentially a cash advance that your bank gives you. Think of it as your bank letting you pay for stuff with their money, provided you repay them at the end of the credit period. But here’s the thing - you can also use it to withdraw actual physical cash from an ATM. 

But hang on a second. Don’t go about using your credit card to withdraw ATM cash. There’s a whole bunch of strings (charges) attached. Read on to know all about them.

What is Credit Card Cash Withdrawal?

The technical term for a cash withdrawal is a ‘credit card advance’. And here are some things you need to know about it.

  • Credit cards primarily function as a means of payment. Cash withdrawals simply serve as an additional feature that these cards provide.
  • Cash withdrawals using a credit card are only allowed up to a certain limit which cannot be exceeded.
  • Different banks may impose different credit card cash withdrawal limits.
  • As a credit card holder, you are expected to pay additional charges in addition to interest on the amount withdrawn from an ATM using a credit card.
  • It isn’t necessary for all credit card issuers to provide their cardholders with a credit card cash withdrawal service.

Charges Applicable on Credit Card Cash Withdrawals

Cash withdrawal charges are termed credit card advance fees. Each time cardholders use this service, a fraction of the amount of cash they withdraw is levied as a cash advance fee. 

  • Ordinarily, banks levy anywhere between 2.5-3% of the cash withdrawn from each credit card cash withdrawal transaction. There also exists a minimum cash advance fee which ranges from ₹300 to ₹500
  • Cash advance fees are incorporated into cardholders’ bills for the subsequent month and are reflected in their billing cycles
  • A finance charge is included under the cash advance fee which usually comes with no interest-free period. This charge will carry forward from the date of the withdrawal right up to the date when the amount has been paid in its entirety 
  • Even if multiple cash withdrawals are made from the same credit card in a single day, the cash advance fee will apply to each individual transaction keeping in mind the amount withdrawn 

Other Financial Charges that may Apply

All credit cardholders are informed of the charges applicable to credit card cash withdrawals at the time that their cards are issued to them. To avoid being caught off-guard, as a credit card holder, you’re encouraged to read all the terms and conditions related to your credit card. This is not an easy feat, but usually there are standard terms that apply to all cards, which you should be aware of.

Financial charges ultimately levied on credit card cash advances depend upon the following factors:

  • The extent to which you use your credit card
  • The frequency of your credit card transactions
  • Your credit card bill repayment behaviour
  • The internal rates of interest that your credit card issuer levies 

Withdrawing Cash Using a Credit Card

The process of withdrawing cash is pretty much the same as you would with your debit card. The only difference of course is your fees. 

You should be aware of the following factors at this point in time:

  • You can withdraw cash using a credit card at any ATM regardless of the bank that issued your credit card
  • Banks sometimes levy an additional fee on when you withdraw cash from another bank’s ATM
  • Make sure to understand what the cash limits on your credit card are before withdrawing any money from an ATM so that you don’t exceed your cash limit
  • In case you withdraw money using your credit card that exceeds your cash limit, your bank may levy an additional fee over and above the finance charges applicable 

Impact on Credit Scores

Cash advances do not impact your credit score. This is because these transactions are recorded in the same manner as all other credit card transactions. Since high-interest rate charges apply to cash withdrawals, maintaining these payments may be challenging. 

Your credit score is only affected if you don’t pay your bills on time. 

Some advantages of Credit Card Cash Withdrawals

Credit card advances are linked to the following advantages.

  • They provide you with access to liquid cash immediately.
  • In contrast to other personal loan sources, credit card cash withdrawals do not require you to complete any documentation and aren’t linked to an approval process.
  • It’s also a great emergency mode of cash withdrawal if you don’t have money in your account and you need cash urgently. 

Some disadvantages of Credit Card Cash Withdrawals

Credit card advances come with certain drawbacks.

  • First things first - it’s expensive!
  • Each credit card cash withdrawal incurs an additional finance charge that’s levied on the amount withdrawn. 
  • The interest levied on credit card cash withdrawals is charged from the date of the transaction till the amount is repaid in full.
  • Reward points aren’t applicable to credit card cash withdrawals

Final Thoughts

It’s advisable to use your credit card for its primary function which is for transactions. Cash withdrawals should only be done in case of emergencies involving an immediate requirement for cash. The additional fees and charges levied on this mode of transaction should also be a clue on why you shouldn’t withdraw cash using credit cards.

Frequently Asked Questions

1. Can credit cards be used to withdraw cash at an ATM? 

Yes, you can swipe your credit card at an ATM the same way you would use a debit card in order to withdraw cash. 

2. Are there charges for using a credit card to withdraw cash? 

No, you cannot withdraw money from an ATM using a credit card without incurring charges. 

3. Does withdrawing money from a credit card affect the credit score? 

No, credit card cash withdrawals do not affect your credit score as they are bracketed under your credit card agency. Also, they are recorded in the same fashion as all your other credit card transactions.

4.What is the interest rate for credit card cash withdrawal?

The average rate for credit card cash withdrawal in India is currently 2.5% to 3.5%

5.Is it okay to withdraw cash using credit cards?

While it's completely okay to withdraw cash using credit cards, it can cost you a heavy interest. It's advised to withdraw using your credit card only on an emergency basis.

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