What is Credit Card cash withdrawal?

If you ever find yourself in a tight spot and need cash urgently, a credit card cash withdrawal, also known as a credit card advance, can be your saving grace. You can borrow money as per the limit on the card and pay it back in convenient instalments.

As with all things, credit cards can also have some advantages and disadvantages. Before you go ahead and withdraw money, let’s see what these are.

What is credit card cash withdrawal?
 

Credit card cash withdrawal enables you to obtain physical currency from an ATM or bank using your credit card. It allows you to access a portion of your credit limit as physical cash. This convenience is quite useful in emergencies but incurs some fees and interest rates. This can be particularly helpful in emergencies or when you encounter businesses that don't accept card payments. 

Why choose the Credit Card cash withdrawal facility?
 

• Fast money: In situations where you may not have the time to arrange funds, your credit card can be the quickest way to get money. You can walk up to any ATM and withdraw the amount you need.
• Easy to use with no intricate application process: You do not need to submit income, address, employment proofs, or an application form. All you need to do is check the bank’s website to know how to use cash advance on your credit card to get an idea of the repayment terms, and withdrawal limits (usually the cash withdrawal limit is ~10% of your prescribed credit limit on your card, etc.
• Available at most leading banks: You can use the credit card cash withdrawal facility at most leading banks. Some banks like the IDFC FIRST Bank also offer interest-free ATM cash withdrawals for up to 48 days on credit cards. This helps you save money while serving your financial needs.

Understand the difference between credit card cash advance limit and credit limit
 

A credit card cash advance limit and a credit limit are discrete terms related to a credit card. Your credit limit is the maximum amount you can spend on your credit card for regular purchases, such as shopping, dining, or online transactions. It represents the line of credit extended to you by the card issuer based on your creditworthiness and is meant for standard, interest-bearing transactions.

On the other hand, a credit card cash advance limit is a portion of your overall credit limit, specifically designated for cash withdrawals. This limit is typically lower than your total credit limit. It's intended for obtaining physical currency from ATMs or over-the-counter transactions. Cash advances typically come with higher fees and interest rates than regular card purchases, making them a more expensive form of borrowing.

Understand credit card cash withdrawal interest rate
 

Credit card cash withdrawal interest rates refer to the cost associated with borrowing cash using your credit card. When you obtain cash through an ATM or bank using your credit card, the card issuer typically charges a higher interest rate than the one applied to regular purchases. This rate is known as the cash advance interest rate.

Cash advance interest rates are usually higher than the standard purchase interest rates, making them more costly. They can range from around 20% to 30% or even higher in some cases. These rates accrue daily, starting from the day of the withdrawal, and compound rapidly, which means that the cost of borrowing cash in this manner can accumulate quickly.

However, with an IDFC FIRST Bank Credit Card, you get interest-free cash advances for up to 48 days, where you can withdraw money and repay it without any interest.

It's important to be aware of these rates and fees, as well as the terms and conditions of your credit card, to make informed decisions about when and how to use cash withdrawals on your credit card. It's advisable to use this option as a last resort due to its high cost.

Learn how to withdraw cash using a credit card
 

Withdrawing cash using a credit card is simple and straightforward.  Follow the below-mentioned steps to withdraw money from ATM using your credit card:

1. Insert the card: Insert your credit card into the ATM's card slot.

2. Enter your PIN: You'll be prompted to enter your Personal Identification Number (PIN), a secure code provided by your card issuer.

3. Select cash withdrawal: Choose the "Cash Withdrawal" option from the menu displayed on the ATM screen.

4. Specify the amount: Enter the amount of cash you wish to withdraw.

5. Confirm transaction: Review the details and confirm the transaction.

6. Collect cash: The ATM will dispense the requested cash, and you can retrieve it.

Shortcomings of a Credit Card cash advance
 

• Credit Card cash advance fee: You would have to pay a fee for availing of cash advance on a credit card. However, banks like IDFC FIRST Bank do offer a low fee of only Rs 250 per transaction.
• Credit Card cash advance interest rate: You will pay interest on the borrowed amount and the fee. Again, you have affordable options like the IDFC FIRST Bank, which firstly doesn’t charge any interest up to 48 days and later on charges monthly interest as low as 0.75% to 3.5%. Many other banks start charging interest on cash withdrawal amount from the very first day.

Are there any alternatives to a Credit Card cash withdrawal?
 

• Credit Card loan program: Apart from the fixed monthly limit, you can also take a loan on your credit card. This is sanctioned over your existing limit. The application and repayment procedure is similar to other loans, with varying interest rates depending on your card, loan amount, etc.
• Personal Loan: Personal loans let you borrow funds for various needs at affordable interest rate options. The processing time is also less, allowing you to cater to emergencies as well as other requirements.
• Collateral Loan: In the case of a high amount, you can pledge a financial asset as security and opt for a collateral loan. Financial assets can include mutual funds, stocks, real estate, etc.
• Salary Advance: You can ask your employer for an advance on your salary. If you have been working with the same company for some time, your employer may be willing to extend you an advance without hassle.

To sum it up
 

Credit card cash withdrawal is a cost-effective, quick, and hassle-free option if you use credit cards. However, if you do not use credit cards, you can resort to other measures, such as loans or a salary advance. Either way, availing of credit is pretty simple today, and you have little to worry about.
 

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject IDFC FIRST Bank or its affiliates to any licensing or registration requirements. IDFC FIRST Bank shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.