Understanding Credit Card Cash Withdrawals: Fees and Implications

Credit Card Cash Withdrawal Explained

If you use a credit card and are considering withdrawing cash from an ATM, it's crucial to understand the associated fees and terms beforehand. Taking out cash using a credit card, known as a 'cash advance,' can be costly not only in terms of interest rates but can also negatively impact your credit history and score.

Charges on Cash Withdrawals

The first fee that applies when withdrawing cash from a credit card is the cash advance fee, which typically ranges from 2.5% to 3% of the amount withdrawn. Some banks may impose a minimum fee that can vary between ₹250 to ₹500. This fee is added to your bill each time you make a withdrawal.

Interest Rates Apply Immediately

In addition to the fees, interest is charged immediately on cash advances. Unlike regular credit card transactions that often come with an interest-free period, cash withdrawals do not offer this benefit. Interest rates can range from 2.5% to 3.5% per month and continue to accrue until the full balance is paid off.

Late Payment Fees Can Be High

Failure to make timely payments can result in late payment fees, which can be as high as 15% to 30% of the outstanding amount. This can adversely affect your credit score, making it more challenging to secure loans or other credit facilities in the future.

Cash Withdrawal Limits

Another important aspect is the cash withdrawal limit. Most banks allow you to withdraw only a limited percentage (for example, 40% at HDFC Bank) of your credit limit. Therefore, cash withdrawals should only be considered in emergencies, as they are an expensive option. If you must withdraw cash, aim to pay off the amount as quickly as possible to avoid additional interest and fees.