October 3, 2022
credit cards

credit cards

Introduction

In March 2022, cash withdrawals using credit cards at ATMs stood at  Rs. 343.71 crores, and the amount of money withdrawn using credit cards during April was Rs. 303 crores.

Although uncommon, many people still use ATMs to withdraw cash using credit cards

However, utilising debit cards to make cash withdrawals is very widespread.

Credit cards have more features and perks than ever before, making them more of a need than a luxury.

For customers, they provide several convenient payment options. 

Additionally, they enable users to use ATM withdrawals to get cash in an emergency, just like a debit card.

But before using your credit card at an ATM, there are a few things you ought to be aware of. 

What is a cash advance? 

If individuals need money urgently, they can withdraw money from the ATM using their credit card, known as credit card cash withdrawal or cash advance. 

It is an optional feature offered to the customers and is not a credit card’s primary function.

One can say a cash advance is a loan given to the customer by the entity that issued your credit card.

When you obtain a cash advance, you borrow funds from the available credit on your card. 

However, withdrawing cash has fees that might vary from bank to bank.

Which considerations must you make before using your credit card at an ATM? 

Following are three points to bear in mind when withdrawing money from your credit card at an ATM:

1. No-interest-free period

Usually, when you purchase with a credit card, you are given an interest-free period, during which no interest is charged. Once that period is over, interest is levied. 

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However, there is generally no interest-free period when withdrawing cash at ATMs from credit cards. 

This means the day the cash withdrawal is made, interest will be imposed on it.

This is because cash withdrawals are considered cash advances, subject to a higher interest rate than regular purchases.

Thus, when you withdraw cash, you are immediately responsible for repaying the full amount borrowed plus any interest and fees that may apply. 

So, if you cannot pay off your credit card balance monthly, it is better to avoid withdrawing cash at ATMs.

2. Charges on each withdrawal

When withdrawing cash from ATM with a credit card, you will be required to pay a specific fee on each withdrawal. 

This fee is known as the cash advance fee, which is usually high and is the percentage of the withdrawn amount or a flat fee. The issuing bank or lender decides on the fee to be charged.  

Interest charges will be charged from the day you take money out of an ATM until the full amount is paid back. 

Also, remember that your cash withdrawal limit can be considerably lower than your total credit limit.

3. Impacts credit score  

Your payment history, how much credit you have used, and how long your credit history is are all taken into account when calculating your credit score.

Cash advances can impact your credit score by affecting one or more of these factors as they must be immediately paid; otherwise, interest will be charged. 

Cash advances generally come with high-interest rates, which can quickly add up and damage your credit score.

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Monitoring your credit score is essential, especially if you are taking out cash advances. 

How do I withdraw money with a credit card?

It is simple to use your credit card to withdraw money from an ATM.

All you need is to locate an ATM, insert your credit card, and the required cash will be yours.

However, keep in mind to adhere to the withdrawal guidelines. Be informed that there will be a fee associated with your withdrawal.

Additionally, before choosing a cash advance, you need to be aware of the credit card’s possible cash limit, the minimum and maximum amount of cash that can be withdrawn, etc. 

Before purchasing a credit card, you must be aware of the terms and restrictions that apply to it. 

Conclusion

Credit cards are excellent resources for establishing credit, controlling cash flow, and accruing reward points.

There are a few essential considerations to keep in mind while choosing a credit card.

Take into account the card’s interest rate and other costs first. Second, think about the rewards programme of the card and whether your spending patterns are compatible with it.

Moreover, when opting for cash withdrawal, look for a card that offers you other benefits and levies a lower fee for withdrawal. 

A solid repayment history aids you in negotiating lesser fees with the card issuer in such a situation.

Last but not least, be sure to carefully read the cardholder agreement to comprehend all the terms and restrictions. 

By taking these variables into account, you can select the credit card that best suits your needs.

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