Credit Cards are an integral part of financial management, offering more than just the convenience of purchases. One of their additional benefits is the option to withdraw cash when needed.
However, Credit Card cash withdrawal comes with specific terms that you must understand. From withdrawal limits and transaction fees to applicable interest rates, it’s crucial to be well-informed before opting for this feature. Understanding a comprehensive breakdown of these charges helps you make informed decisions when using your Credit Card for cash withdrawals.
Cash withdrawal charges
When accessing cash through Credit Cards, it is important to understand that this service is not free. Financial institutions levy specific fees for cash withdrawals made using Credit Cards. These fees may vary depending on the card type a customer holds.
Among the common fees are cash withdrawal fees, transaction fees, and foreign currency transaction fees, each tailored to meet the diverse needs and spending habits of different customer segments. Being aware of these charges helps make an informed decision when choosing a Credit Card and using its cash withdrawal feature.
What is a Credit Card cash advance fee?
A Credit Card cash advance fee is the charge levied when you withdraw cash using your Credit Card. Unlike regular transactions, withdrawing cash comes with immediate fees, which are typically a percentage of the withdrawn amount, ranging from 2.5% to 3.5%.
Additionally, the cash advance doesn’t benefit from the interest-free period applicable to regular purchases. Interest starts accruing from the day of withdrawal. It's essential to consider these costs before using your Credit Card for cash advances to avoid unnecessary expenses.
Also Read: Credit Cards: Six reasons why you should have a credit card
Types of cash withdrawal charges
Credit Card cash withdrawal charges vary as per bank and card type. Generally, these charges include:
1. Flat fee per transaction: A fixed amount charged per cash withdrawal.
2. Percentage of withdrawn amount: A variable fee based on the amount withdrawn.
3. ATM usage fees: Additional charges by the ATM's bank.
4. Immediate interest charges: Interest accruing from the time of withdrawal.
5. Foreign transaction fees: Additional fees for withdrawals in a foreign country.
6. Bank-specific charges: Unique fees based on the bank's policies.
For example, for Axis Bank Select Credit Card, the cash withdrawal fee is 2.5% of the withdrawn amount, subject to a minimum of ₹500. Every time you withdraw cash, a portion goes towards this fee. Additionally, there are finance charges of 3.6% a month (equivalent to 52.86% per annum) on retail purchases and cash withdrawals. These charges highlight the cost associated with the convenience of instant cash access and underscore the importance of using this feature judiciously.
Cash withdrawal interest rates
Interest rates on Credit Card cash withdrawals often surpass those charged on regular purchases. For Axis Bank Credit Cards, this rate is between 3% and 4% a month. This rate is applicable from the moment cash is withdrawn and continues until the amount is fully repaid. Hence, cardholders must clear their dues promptly each month to avoid accumulating high interest.
Cash advance limit vs credit limit
You need to know the difference between your Credit Card's cash advance limit and its credit limit.
While the credit limit is the total amount you are authorised to spend on your card, the cash advance limit is specifically the maximum amount you can withdraw as cash, which is typically around 40% of your overall credit limit.
For example, if your Axis Bank Credit Card has a limit of ₹1,00,000, you can withdraw up to ₹40,000 as cash. This limit ensures cardholders have sufficient balance for their cash and non-cash needs while safeguarding them from overextending their financial obligations.
Pros and cons of cash withdrawal
| Pros |
Cons |
| Instant access to funds: Credit Cards provide a quick solution when you need cash immediately. |
Higher costs: A high-interest rate and cash withdrawal fees make it a more expensive option than other credit forms. |
| Emergency utility: This feature can be a lifesaver during emergencies where digital payments are not feasible. |
Credit score impact: Frequent withdrawals and high utilisation of the cash advance limit can negatively impact your credit score, affecting your future creditworthiness. |
Also Read: 6 benefits of using a Credit Card
How to withdraw from a Credit Card?
Here are the steps for withdrawing cash using a credit card:
Step 1. Find an ATM that accepts Credit Card.
Step 2. Insert your card, and select the ‘Cash Withdrawal’ option.
Step 3. Enter the amount within your cash limit.
Step 4. Acknowledge the fees and complete the transaction.
Step 5. Collect cash and transaction slips for records.
Conclusion
In summary, Credit Card cash withdrawals offer a convenient yet somewhat expensive way to access funds. Understanding the various types of charges associated with this feature is essential for any user. These charges, ranging from flat fees per transaction to interest charges from the day of withdrawal, can significantly impact your overall financial health if not managed carefully.
Embracing the convenience of Credit Card cash withdrawals comes with the responsibility of understanding and managing the associated fees and interest rates. Axis Bank, among other financial institutions, offers this feature with clear guidelines, enabling its customers to navigate their financial needs with confidence and ease.
FAQs
Are there any charges for Credit Card cash withdrawals?
Yes, Credit Card cash withdrawals are subject to cash advance fees, which typically range between 2.5% and 3.5% of the withdrawn amount. Additionally, interest accrues from the withdrawal date until repayment, and certain cards may have a withdrawal limit.
How do you withdraw cash from a Credit Card without fees?
Unfortunately, it’s not possible to withdraw cash from a Credit Card without incurring fees. Cash advances always come with charges, including a cash advance fee and interest from the date of withdrawal, making it essential to use this feature wisely.
How to calculate charges for cash withdrawal from a Credit Card?
To calculate cash withdrawal charges, consider both the cash advance fee (typically 2.5% to 3.5% of the amount) and the interest that starts accruing immediately. For example, withdrawing ₹10,000 with a 3% fee will result in a ₹300 fee, plus daily interest on the withdrawn amount.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author 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. Please consult your financial advisor before making any financial decision
