What Is Credit Card Cash Withdrawal?

Everyone knows that credit cards are used to pay for things like groceries and bills, but what most people don’t know is how you can use your card to withdraw money in your bank account. This article will help explain this by breaking down the process of withdrawing money with a credit card. You will learn how much cash you can withdraw at a time, whether it is interest-free or not, and even what type of fees you will have to pay on amounts you may be able to withdraw.

What is a Credit Card Cash Withdrawal?

Credit card cash withdrawal is also popularly known as a cash advance. Cash advance is a form of credit that allows you to instantly receive money from your credit card when you use it with an ATM. You’ll need to pay back the cash advance in full, plus interest.

It is basically an unsecured loan that can be accessed by the borrower as soon as it is needed. You’ll pay a fee for this service (usually around three percent or so), but it’s generally less expensive than other forms of loans available.

How Does Cash Withdrawal From Regular Credit Card Work?

Using your credit card to withdraw cash during a financial crisis is a tempting option, but one that can eventually increase your financial burden.

When you use your credit card to make a purchase, you are billed on the next billing date. Depending on your date of purchase, banks normally give an interest-free period of 15 to 45 days, 20 to 50 days etc., depending on their policies. But this is not the case with cash withdrawal on credit cards. Whenever you withdraw cash from credit card a cycle different from a credit card purchase cycle kicks in.

Advantages of Withdrawing Cash from Your Credit Card

• You can use the money for anything, like paying off bills or buying groceries.
• The funds are available immediately without any hassle.
• There are no restrictions on how you have to spend the cash.
• When you use a credit card to withdraw cash, you don’t need to get approval from the bank or fill out any documentation. This makes it a convenient way to get some money when you need it.

Disadvantages of Withdrawing Cash from Your Credit Card

• You will have to pay a fee for the cash advance, charged by the issuing bank.
• If you do not pay off the full amount of the charge within the repayment period, your interest rate will go up.
• The bank may reduce your credit limit if you miss out on your repayments.
• Despite the size of the transaction, you will not earn any rewards points for credit card withdrawals. You will have to pay interest on the transaction from the date of the transaction until it is paid off in full.

How to Withdraw Cash Using a Credit Card

Withdrawing cash from a credit card is just as easy as using a debit card. You need to follow the same process at an ATM. But there are a few things you should know:

• You can obtain an advance on your credit card at any ATM, regardless of your credit card issuer.
• You need to generate a credit card PIN before making a cash withdrawal from your nearest ATM.
• Some banks may charge you an additional fee if you withdraw cash from a third-party ATM.
• Some credit card companies may limit the amount you can withdraw from your credit card on any given day.
• If you take out more cash than your limit allows, your bank may charge an additional fee on top of the finance charges.

No Free Credit Period for Cash Withdrawal

There is no free credit period. The interest starts getting calculated from day one itself. Cash withdrawal on a credit card also incurs a transaction fee and a finance charge. These vary between banks but can be as much as 2.5% to 3% of the amount withdrawn or a minimum amount, set at the discretion of the bank. Customers pay the higher of the two amounts. The finance charge or interest on cash withdrawal from a credit card is also high when compared to credit card purchases.

Can We Withdraw Money From Credit Card From ATM?

The answer is yes. Banks charge customers each time they withdraw money using their credit cards from the ATM. These charges are less if the bank ATMs are used, and very high when ATMs of other banks are used to withdraw the cash.

What Is Credit Card Cash Advance Limit and How Is It Different From Credit Limit?

While credit limit is the maximum amount you can spend on a credit card, the cash limit is the maximum cash you can withdraw using your credit card. 

The cash limit component is usually included in the credit limit and is communicated to you when the credit card is issued. Most credit card lenders offer 20% to 40% of the total credit limit as cash limit. This means if you have a credit limit of ₹ 1 Lakh on your credit card, you can withdraw cash up to ₹ 20,000 to ₹ 40,000 using the card. The rest has to be spent as regular card transactions. 

The cash limit varies from bank to bank and from customer to customer. The banks can decrease or increase your cash limit depending on your spending pattern, repayment behaviour, and other credit information obtained from credit bureaus. If there is a revision, the bank will communicate it to you through an email or message. 

MoneyTap Credit Card 2.0 is different from a traditional credit card. While traditional credit cards have cash limits, ranging from 20 to 40%, MoneyTap offers 100% cash limit on its credit card. 

What Is the Interest on Cash Withdrawal From a Credit Card? 

Unlike a retail purchase, where you get to enjoy an interest-free period ranging from 20 to 50 days, cash withdrawals attract interest rate from the first day itself. Cash advance accrues interest at the rate of 2.5%-3.5% per month. You are also charged a transaction fee, which is typically at about 2%-3% of the transaction amount. That’s not all. Taxes are also charged over the interest, and that makes cash withdrawals using your credit card a very costly affair. 

Here’s a list of charges that are associated with credit card cash withdrawal:

• Interest
  Cash advances using credit cards do not have an interest-free period. Typically, the interest charged on cash withdrawals ranges from 2.5% to 3.5% per month.  
• Cash advance fee
  Every time you make a cash withdrawal using a credit card, a cash advance fee is charged, which is typically in the range of 2.5% to 3% of the transaction amount. 
• Finance charges
  Like any other credit card transactions, cash withdrawals also attract finance charges. Charges are applied from day one until the amount is paid in full. 
• Late payment fee
  If you fail to pay the full amount, late payment charges are applied on the outstanding balance, which range from 15% to 30%. 

How to Withdraw 100% of Your Credit Limit Without Fee?

So how can you meet the requirements of cash in a financial emergency while avoiding paying these hefty fees? You can do this by getting a line of credit/credit card from MoneyTap.

MoneyTap approves a line of credit for your personal use and lets you access this credit via its app and also through the MoneyTap credit card.

While the MoneyTap credit card works like any other credit card with reward points and benefits, you can use the MoneyTap app to transfer a part or all of your approved limit into your own bank account. This transfer is instant and can be done with a few taps on the app.

This money is then available for cash withdrawal or any other transactions you may wish to do. This unique MoneyTap feature that lets you transfer the entire credit limit into your bank account makes it possible to withdraw 100% of your credit limit. You will not get this feature on any other regular credit card. With MoneyTap’s personal line of credit, you get all the features of a credit card plus more! You can use your money as you like and as much as you need.

A credit card is an excellent financial tool if you get the knack of using it wisely and responsibly. Using credit cards like cash tools is not advisable. However, MoneyTap can be listed down as an exception. Here’s why: MoneyTap allows you to withdraw 100% of your credit limit at a low-interest rate. Although you can withdraw 100% of your credit limit, the interest will be charged only on the amount you withdraw, and not on the entire credit limit. You also have an option to repay the amount in flexible EMIs over a repayment tenure you choose according to your financial capability. Become an educated consumer and use MoneyTap Credit Card for cash withdrawals and save money.

FAQs

Can I avoid paying a cash advance fee?

In order to avoid a cash advance fee, the best course of action is to avoid taking a cash advance. If you find yourself in a situation where you must take a cash advance, try to minimize the amount you withdraw. The interest amount on a cash advance starts building from the moment you withdraw some money, so paying it off as soon as possible might help you to save some funds.

What is the credit card cash withdrawal limit?

The maximum amount you can withdraw from your credit card is not the same as your credit limit. The cash limit is typically a percentage of the credit limit, so remember that when you’re shopping for a credit card or making a withdrawal.

Will my credit score get affected if I get a cash advance at an ATM?

No, your credit score will not get affected if you get a cash advance at an ATM. High credit utilization ratio, late repayments, and other such factors are responsible for affecting your credit score.

Is the facility of cash withdrawal available on all credit cards?

Not all credit cards allow you to cash out your balance. Some banks choose not to provide the service, so you’ll need to check with your bank before making any important purchases.