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

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.

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 High Cash Advance Fee: Card issuers charge a cash advance fee, usually 2.5% to 3.5% of the withdrawn amount or a fixed minimum fee.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.