A credit card offers valuable features like EMI conversion and balance transfers, and you should learn about them all, including cash advances. What is a cash advance? Withdrawal of money as per your credit limit and eligibility is what this facility is all about. It allows you to directly withdraw cash at an ATM.
This feature provides you with quick access to funds, but you should keep credit card cash advance fees in mind before you proceed. These fees, along with ATM charges and interest rates, can impact your monthly budget.
Cash advance serves as a convenient financial lifeline for you in an emergency. So, it is a great feature to have as a backup. Some instances when you can benefit from a cash advance may include:
To finance a sudden medical need
To repair your home/vehicle at the end of the month
To tide over your obligations in case of loss of job
However, you should be well aware of the terms and conditions before using this facility to avoid unexpected financial stress.
Know the Fees Applying to Credit Card Cash Advances
Credit card companies charge a fee when you withdraw cash using your credit card. This fee typically ranges from 2.5% to 3% of the transaction amount and the minimum charge is ₹250 to ₹500. This depends on your card.
Interest starts accruing from the day of withdrawal. This can be costly due to the combined impact of fees and high interest rates. To attract customers, some issuers offer an interest-free period for a cash advance for a limited time. Check out the terms for this and use a card offering this feature to make a cash advance more pocket-friendly.
Charges Related to Credit Card Cash Withdrawal
The different charges associated with cash withdrawal are explained in the table below:
| Type of Charge | Description |
| Flat Fee Per Transaction or Percentage of Amount | A fixed fee per withdrawal or a percentage of the cash withdrawn is called the credit card cash advance fee |
| ATM Usage Fees | Extra charges by the bank’s ATM |
| Interest | Interest starts from the date of withdrawal unless otherwise specified |
| Foreign Transaction Fees | Charges for withdrawals outside India |
How Credit Card Cash Advances Work
A cash advance is a short-term loan provided by a credit card issuer. It allows you to borrow money from your card’s limit. You can make a cash advance by following these steps:
At an ATM
- Find an ATM that accepts credit cards
- Insert your credit card and select the ‘Cash Withdrawal’ option
- Enter the withdrawal amount; it should be within your cash limit
- Confirm the fees and complete the transaction
- Collect your cash and transaction slip for your records
In Person
- Visit your bank branch
- Request a cash advance with your credit card
Online Banking
- Log in to your bank’s online platform
- Look for the ‘Cash Advance’ option
- Follow the instructions to transfer the required amount
Things to Remember When You Make a Cash Advance & Tips to Save
Before withdrawing cash using your credit card, you must consider the following points:
Understand the Structure of Payment Allocation
- Cash advances are paid off only after your regular balance has been cleared; this is if you are making the minimum payment
- The interest starts building immediately and carries higher rates than that applied to the outstanding balance
- Pay both balances to avoid extra charges
Pay off Cash Advances Quickly:
- There’s no grace period for cash advances, so interest starts accruing instantly (unless your issuer offers an interest-free period)
- Repay fast to avoid high interest
Know the Rules of Different Banks:
- Different banks have different rules for cash advances
- Transactions such as buying foreign currency or using an ATM abroad are sometimes treated as cash advances, incurring higher interest
- Cash advances don’t have purchase protection
Withdrawal Limit When Using Your Credit Card For Advances
How much you can withdraw depends on your credit card type and the cash advance limit. It is a portion of your overall credit limit. Usually, the cash advance limit ranges from 20% to 40% of your total credit limit.
For example, if your credit limit is ₹1,00,000, you can withdraw between ₹20,000 to ₹40,000. The remaining balance of your credit limit can only be used for purchases.
Pros and Cons of Credit Card Cash Withdrawals
Pros:
- Quick access to cash during emergencies
- No need to use funds from your savings account
- No requirement for bank approval or extensive documentation
- Cash withdrawal limit based on your credit limit
Cons:
- Cash withdrawal fees apply for each transaction
- No interest-free period; interest starts from the date of withdrawal
- Cash withdrawals do not earn reward points
- Too many withdrawals can lead to debt accumulation
Tips for Using Credit Card Cash Withdrawals Wisely
It is best to use cash advances only as a last resort. Try using your savings or borrow from other sources before opting for cash withdrawals as they may be more economical. Follow these simple dos and don’ts:
| Dos | Don’ts |
| Check fees and interest rates before making a withdrawal | Use it for unnecessary purchases |
| Use credit card cash withdrawal only in emergencies | Withdraw more than you need |
| Pay off the balance as quickly as possible | Max out your credit card limit with a withdrawal |
While the cash withdrawal feature proves to be a boon during emergencies, it often comes with a high credit card cash advance fee and interest rate. If you’re looking to get a credit card that offers all these features at attractive rates, consider the One Credit Card.
Applying for this credit card is simple as it has easy-to-match eligibility criteria with minimal paperwork. It not only offers the convenience of withdrawing money as a loan right on the OneCard App but also provides 5X rewards on your top two spending categories, with points credited instantly.
What’s more, you can save with offers on dining, entertainment, shopping, travel, education and fuel. Apply now to enjoy facilities such as instant EMI conversion, redemption of points for shopping, setting budgets for different categories of payments, and more with this lifetime-free credit card!
