Credit cards have revolutionized the way we handle finances, offering convenience and flexibility in managing expenses. While they are primarily designed for making purchases, they also come with the option of cash withdrawal. However, it's crucial to comprehend the various aspects associated with credit card cash withdrawal, such as limits, charges, and interest rates. In this blog, we'll delve into these details to provide you with a comprehensive understanding of how cash withdrawals on credit cards work in India.
Credit Card Cash Withdrawal Limit
Every credit card comes with a predefined cash withdrawal limit, which is usually a percentage of the overall credit limit. In India, this limit typically ranges from 20% to 40% of the total credit limit. For instance, if your credit card has a limit of ₹50,000, the cash withdrawal limit would be around ₹10,000 to ₹20,000.
It's important to note that exceeding this cash withdrawal limit may result in additional charges or even the transaction being declined.
Cash Withdrawal Charges
- Cash Withdrawal Fee: When you use your credit card to withdraw cash from an ATM, the issuing bank charges a cash withdrawal fee. This fee usually ranges from 2.5% to 3.5% of the withdrawn amount, subject to a minimum and maximum limit. For instance, if you withdraw ₹10,000, and the cash withdrawal fee is 3%, you'll be charged ₹300.
- ATM Usage Fee: In addition to the cash withdrawal fee, some banks also charge an ATM usage fee. This fee varies depending on the bank and ATM network, so it's important to check with your card issuer for specific details.
- Interest on Cash Withdrawals: Unlike regular purchases, cash withdrawals on a credit card often incur higher interest rates. The interest is calculated daily until the amount is paid in full. It's crucial to repay the cash advance as soon as possible to avoid accruing hefty interest charges.
Interest Rates on Cash Withdrawals
Interest rates on cash withdrawals are typically higher than those for regular purchases. While the exact rates may vary between banks and credit card providers, they generally range from 2.5% to 3.5% per month, which amounts to an annual percentage rate (APR) of 30% to 42%.
It's worth noting that interest starts accruing immediately after the cash withdrawal, unlike with regular purchases, where there is usually a grace period.
Managing Cash Withdrawals Wisely
While credit card cash withdrawals can provide quick access to funds in emergencies, it's essential to use this feature judiciously. Here are some tips to manage cash withdrawals effectively:
- Limit Cash Withdrawals to Emergencies: Given the associated charges and high-interest rates, it's advisable to use cash withdrawals only for genuine emergencies.
- Pay off the Balance Promptly: To minimize interest charges, repay the cash advance as soon as possible. This will prevent the debt from accumulating and becoming unmanageable.
- Explore Alternative Options: Consider other options like personal loans or lines of credit if you require a substantial amount of cash. These options may offer more favorable terms compared to credit card cash withdrawals.
Conclusion
Credit card cash withdrawals can be a useful feature in times of need, providing immediate access to funds. However, it's crucial to understand the associated limits, charges, and interest rates to make informed financial decisions. By using this feature judiciously and repaying the amount promptly, you can make the most of your credit card while minimizing the financial impact. Always consult with your card issuer or financial advisor for specific details related to your credit card.Regenerate