Credit Card Cash Withdrawal Charges, Fee, Interest Rates, Limit

Credit Card Cash Withdrawal allows you to withdraw cash off your available credit card limit via an ATM or bank. Out of your total credit limit, card issuers assign a particular cash limit on your credit card which usually ranges from 20% to 40% of your total limit.

The credit limit is the maximum amount you can spend using your credit card whereas the cash advance limit is the maximum cash you can withdraw using the credit card. 

Want to know more about Credit Card Limit? Click here.

Credit card cash advance fee is the fee levied on every cash withdrawal you make using your credit card. Usually, it is a small percentage of the total amount withdrawn and generally ranges between 2.5% to 3% of the withdrawn amount subject to a minimum amount of Rs. 300 to Rs. 500. Besides the cash advance charges, cash withdrawals are also implied with interest rates, as they are not eligible for the interest-free period. Thus, the finance charges are applicable from the first day. 

An important point to note here is that credit card interest rates (finance charges) are quite high; they can range from 2.5% to 3.9% per month. Moreover, interest on credit cards is compounded on a daily basis so the longer your cash advance stands unpaid the more interest will be accrued. This is why it is not advisable to opt for cash withdrawals on credit cards and, if you do, you must try to pay back the amount as soon as you can.

Credit cards with low charges on cash withdrawals, are usually premium or super-premium credit cards. Some might also offer no charges on cash withdrawal, but usually come with high annual fees. These cards are listed as follows:

Here are some of the advantages and disadvantages of the cash withdrawal facility. So, before you swipe your credit card at the nearest ATM, understand the pros and cons of the same-

Withdrawing cash from a credit card is the same as withdrawing cash from a debit card. You can visit your nearest ATM and withdraw the required cash anytime. Cash withdrawals can be done at ATMs of any bank. However, a few banks may charge a different cash advance fee for withdrawing cash using ATMs of other banks. 

Cash withdrawal on credit cards is not reported separately to the credit bureaus. Only the whole outstanding amount, which is due along with other defaults, is reported to the credit agencies. Hence, withdrawing cash using credit cards does not impact your credit score directly.

However, in case you fail to pay even the minimum amount due on your credit card within the stipulated period then the credit score is impacted. As long as you are able to keep track of all the outstanding balances and are able to clear the payment, your credit score remains stable.

Suggested Read: How credit cards affect your credit score?

Using a credit card for cash withdrawal may seem convenient during emergencies, but it comes with multiple disadvantages. Here are the key reasons why you should avoid using a credit card cash advance:

1. High Cash Advance Fee: Card issuers charge a cash advance fee, usually 2.5% to 3.5% of the withdrawn amount or a fixed minimum fee. This instantly makes your transaction expensive.
2. No Interest-free Period: Unlike regular credit card purchases that come with an interest-free period, cash advances attract interest from day one. There is no grace period, which means your debt begins accumulating immediately.
3. Higher Interest Rates: Cash advances generally carry a higher interest rate compared to normal card transactions. This can result in a much larger repayment amount if not cleared quickly.
4. No Reward Points or Cashback: Most credit cards exclude cash withdrawal from their cashback or rewards programs. Therefore, withdrawn cash does not earn any value-back. You pay more without gaining anything in return.
5. Risk of Falling into a Debt Trap: With high fees, high interest, and no grace period, cash advances can spiral into unmanageable debt if repayments are delayed.

What is interest free cash withdrawal?
Usually, credit card cash withdrawals are charged with finance charges or interest rate from the date of cash withdrawals, along with the cash advance charges. However, with interest-free cash withdrawal on  a credit card, you are not charged with the interest rates, but only with the cash advance charges. Currently, IDFC FIRST Bank offers interest-free cash withdrawals, on its lifetime free credit cards like, IDFC FIRST Millennia, IDFC FIRST Wealth and IDFC FIRST Select.

Do I have to get the approval for withdrawing cash from my credit card?
No, you do not need to take approval from the bank in case your credit card has this facility. You can visit an ATM and withdraw cash almost immediately.

Do I have to pay additional fee for withdrawing cash from my credit card?
Yes, the cardholder has to pay an additional fee for availing this facility.

Where is the cash withdrawal transaction mentioned for the credit card?      
The cash withdrawal transaction is mentioned in your credit card statement. Additional fees and charges related to it are also mentioned in it.

When should I repay the withdrawn cash? Do I have to pay it in cash?
The withdrawn cash has to be repaid at the time of making payment for the statement. There is no need to pay the amount in cash. The payment can be made online, through UPI, demand draft, etc.