Credit cards issuer offers the convenience of withdrawing cash from ATMs or banks, providing immediate access to funds when needed. However, credit cardholders must consider several key factors, such as associated fees, interest rates, potential effects on credit score, credit limit, etc. to make informed decisions about whether to proceed with cash withdrawal using a credit card.

What Is Credit Card Cash Withdrawal?

A credit card cash withdrawal is the process of withdrawing cash using your credit card from an ATM. As you think of it, credit cards are typically used for card transactions. However, credit card cash withdrawal is an additional feature added by card issuers. Using this feature, cardholders can withdraw money within the permitted limits, which will vary based on the bank. The cardholder should repay the amount along with interest and other applicable charges.

Difference Between Credit Card Cash Limit and Credit Limit

The credit card has two different limits such as credit limit and the cash limit. The credit limit is the overall limit for your credit card. Within this, the cash limit allows the cardholder to withdraw a maximum of 20 to 40% at ATMs, with the remaining 60 to 80% of the credit limit available for card transactions.

For example, if one has an overall credit limit of ₹1,00,000, the cash limit is 20 to 40%, which is ₹20,000 to ₹40,000. This means the cardholder can withdraw ₹20,000 to ₹40,000 from the ATM, and the remaining amount of ₹60,000 to ₹80,000 can be spent via card transactions.

The cash advance limit is communicated to you when you receive your credit card and may vary from card to card or from one cardholder to another. This limit is not fixed and can change at the bank’s discretion based on your spending patterns, repayment behaviour and credit information.

What is Cash Advance Fee in Credit Card?

The cash advance fee is charged every time you withdraw cash from an ATM using your credit card. This fee normally ranges from 2.5% to 3% of the withdrawn amount, with a minimum amount of ₹250 to ₹500. These fees will be reflected in your credit card billing statement.

For example, if you withdraw ₹10,000 and the cash advance fee is 3% with a minimum of ₹300, you would be charged ₹300 as the fee. This cash advance fee will appear on your next monthly billing statement. If you make multiple cash advance transactions on the same day, you will be charged separate fees based on each withdrawal amount.

Credit Card Cash Withdrawal Charges

The fees associated with credit card cash withdrawals typically consist of two main components.

  1. Cash Advance Fee: A percentage of the withdrawal amount, typically ranging from 2% to 5%, is charged upfront by your credit card issuer.
  2. ATM Cash Withdrawal Fee: A fixed amount imposed by the ATM operator for each transaction and generally ranges between ₹100 to ₹150 per withdrawal.

These charges can add up quickly, especially if you make frequent cash withdrawals or withdraw large amounts. You must manage these charges effectively by using credit card cash withdrawals only when necessary. Remain informed about the associated charges to make informed decisions.

Interest Rates for Credit Card Cash Withdrawal

The interest rates for credit card cash withdrawals can be quite high compared to regular credit card transactions. Interest is charged at a monthly percentage rate, applicable from the transaction date until the full repayment is made.

These interest rates may differ from bank to bank and even from one card variant to another. They are dynamic and subject to change at the bank’s discretion. Various factors, such as your card usage, spending frequency, and repayment behaviour, can influence interest rates.

For example, a bank may charge a monthly interest rate of 3.5% on cash withdrawals using a credit card, which translates to an annual interest rate of 42%. You must know the interest rates, as these charges can quickly accumulate if the outstanding balance is not paid off promptly.

Finance Charges on Credit Card Cash Withdrawal

Credit card cash withdrawals, also known as cash advances, are subject to finance charges. These credit card cash withdrawal charges are different from the interest rates applied to regular credit card purchases. Cash advances incur finance charges, where interest is charged at a monthly percentage rate. These charges are levied from the transaction date until the full repayment is made.

The typical range of interest rates for cash advances is 2.5% to 3.5% per month. Interest rates can vary between banks and different card variants and are communicated to you at the time of card issuance. These rates are dynamic and are subject to change at the bank’s discretion. Card-specific factors, such as your card usage, spending frequency, and repayment behaviour, can significantly impact the interest rates applicable to your specific credit card.

The Effect of Credit Card Cash Advances on Your Credit Score

Withdrawing money from your credit card does not have a direct impact on your credit score. Credit card cash withdrawals are considered regular transactions and are not separately reported to the credit agencies.

However, you must understand the financial implications of cash advances. These transactions typically incur a high-interest rate and charge, making managing your credit card debt challenging.

Failure to make timely payments or only paying the minimum amount due on your credit card bills can have an adverse effect on your credit score. Late or missed payments, as well as high outstanding balances, can lower your credit score.

To maintain a good credit score, make at least the minimum required payment on time every month and, ideally, pay the full outstanding balance to avoid accumulating interest charges. Maintain a healthy credit score by making timely and consistent payments of your credit card bills, including any cash advance balances.

How to Withdraw Cash From a Credit Card?

Let us learn how to get cash from a credit card.

Here are the steps:

  1. Visit any ATM and follow the on-screen instructions for cash withdrawal, similar to using a debit card at an ATM.
  2. Insert your credit card and enter your PIN.
  3. Select the “Cash Withdrawal” or “Cash Advance” option.
  4. Enter the desired amount you wish to withdraw (within your cash advance limit).
  5. Complete the transaction by following the prompts.

You can withdraw cash from any ATM, not just the ones associated with the bank that issued your credit card. However, using ATMs of other banks may result in variations in cash advance fees and ATM withdrawal charges.

Before using the cash advance feature, understand the applicable terms and conditions, including associated charges. Use this service responsibly to avoid unexpected fees and costs.

Advantages of Credit Card Cash Withdrawal

  • Instant cash availability at any time and location provides convenience and flexibility in handling emergencies or unexpected expenses.
  • No need for additional bank approvals or documentation, streamlining the process of obtaining cash.
  • Flexible credit card cash withdrawal limits can be enhanced based on spending patterns and payment history, allowing access to higher cash withdrawal amounts as needed.

When the outstanding balance includes both cash advances and other transactions, payments are typically allocated first towards clearing the minimum amount due, followed by taxes, fees, interest charges and finally, the cash advance principal. Clear all dues to ensure payments are applied towards the cash advance balance, as cash advances typically incur higher interest rates and charges.

Disadvantages of Credit Card Cash Withdrawal

  • A cash advance fee is levied upon each use of the cash withdrawal feature, typically a fixed amount or a percentage of the withdrawn amount.

  • This cash advance fee incurs finance charges from the transaction date until the full repayment, adding to the overall cost of the cash advance.

  • Interest rates on cash advances are generally higher. The interest amount accumulates from the transaction date until full payment, making it a costly option compared to other sources of credit or borrowing.

  • Credit card transactions involving cash advances do not earn reward points, regardless of the transaction size. This means that users miss out on potential rewards or cash-back opportunities.

  • Cash advances do not offer an interest-free period, unlike regular credit card transactions. Interest accumulates from the transaction date until the outstanding balance is entirely paid off, potentially resulting in significant interest charges if the balance is not cleared promptly.

Frequently Asked Questions

1. Do I need to get approval for withdrawing cash from my credit card?

Yes, typically, you need to request a personal identification number (PIN) from your credit card issuer to withdraw cash. This PIN is essential for security and authorisation purposes.

2. Are all credit cards eligible for a cash advance?

Most credit cards offer a cash advance feature. Check your card’s terms and conditions to confirm your eligibility and associated charges. Some issuers may restrict or charge higher fees for cash advances on certain card variants.

3. Can I withdraw cash using other bank ATMs?

Yes, you can withdraw cash using your credit card at any ATM, not just the ones associated with the bank that has issued your card. However, using a different bank ATM may result in varying cash advance fees and ATM withdrawal charges imposed by the ATM operator.

4. Can I withdraw money from my credit card without charges?

Unfortunately, no. Credit card cash withdrawals always incur charges, such as cash advance fees, ATM withdrawal fees, and interest charges, from the transaction date until full repayment. Consider these charges before making a cash withdrawal.

5. Do all credit cards have ATM fees?

No, not all credit cards have ATM fees in India. Some credit cards may charge ATM fees for cash withdrawals, while others may offer a certain number of free ATM transactions per month. Check with your credit card issuer to understand the fees associated with ATM withdrawals in India.

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