Cash advance by credit card: what you need to know before withdrawing money from your credit card

While credit cards are undoubtedly an easy and convenient way to get much-needed cash, one should carefully consider one’s interest and other related charges before availing of a cash advance on one’s home. credit card.

The cash advance feature is one of the many features available on a credit card that provides instant cash to cardholders. And we are often tempted to withdraw money when needed. However, according to financial experts, withdrawing money with your credit card is not the most ideal thing to do given the huge fees associated with it.

For example, “When you use your credit card to withdraw money, you are charged approximately 2.5% to 3% of the amount withdrawn, subject to a minimum amount of between Rs 500 and Rs. 700, sometimes less or sometimes more, as it varies from bank to bank, ”says Aditya Kumar, Founder and CEO of Qbera.com.

Besides the withdrawal fees, you will also have to pay the interest associated with the transactions. Interest charges are separate and quite massive, with withdrawals subject to daily interest charges until the amount is fully settled. In most cases, banks charge interest charges of between 2.5% and 4% per month.

You should also remember that there is no interest free period for cash withdrawals. Thus, interest would be charged on the amount from day one. This interest rate varies from bank to bank and can reach 48% per year.

“Now suppose the amount, whether minimum or total, is not paid on the due date. If this happens, late payment fees of between 15% and 30% would be levied on the outstanding balance, and paying them in addition to principal and interest could be very costly. Therefore, withdrawing money by credit card is not recommended. If there is a shortage of cash, there are other loan options available that could be cheaper than credit cards, ”said Ranjit Punja, co-founder and CEO of CreditMantri.

So while credit cards are undoubtedly an easy and convenient way to get much-needed cash, one should carefully consider one’s interest and other related charges before availing of a cash advance. on his credit card.

Here is an overview of some of the fees associated with cash credit card loans:

Cash advance fees: These fees are charged each time a credit card is used to withdraw money and typically range from 2.5 to 3% of the amount withdrawn, subject to a minimum amount of Rs 500 to Rs 700.

The interest: Interest on credit card cash advances is billed monthly and debited from the date of the transaction until the loan is paid off in full. Banks typically charge an interest rate of 2.5% to 4% per month on all cash advances. The rate varies depending on the bank and the card.

Late payment fees: If the amount is not paid in full, late fees ranging from 15% to 30% would be levied on the outstanding balance.

Moreover, “since there is no interest free period on cash withdrawals by using credit cards, interest starts accruing from day one until the outstanding amount is paid off in full. Thus, cardholders should avoid withdrawing money from their credit cards and opt for other options such as line of credit, which provide the ability to withdraw up to 100% of the card limit. cash credit at no additional cost, ”advises Kunal Varma, Commercial Director. & Co-founder, MoneyTap.

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