Cash Advance facility on credit cards simply means the facility to withdraw cash using your credit card. Generally, credit cards are not supposed to be used for cash withdrawal as debit cards/ATM cards are used for the same. Still, some people are unaware of the drawbacks of withdrawing cash from their credit cards and they do it. A credit card cash advance facility is provided by the card issuers for emergency situations only.
However, it’s up to you when you are using them, but you should know it can be disadvantageous for you and your financial health. If you are also using a credit card, you must be aware of the following three things before availing of the credit card cash advance facility:
3 Things You Must Be Aware Of:
Cash Advance Charges
Before withdrawing cash using your credit card, you should be aware of the cash advance charges. Cash advance fee is the fee that is charged when you withdraw cash using your credit card. This is generally 2.5% of the withdrawn amount subject to a minimum amount which can vary for different card issuers. The charges reflect on your credit card statement when you avail of the facility. You can check for the same in the most important terms and conditions of your respective card issuer. Following is a list of cash advance fees charged by some major card issuers on most of their credit cards:
-HDFC Bank – 2.5% of the withdrawn amount or Rs. 500 (whichever is higher).
-American Express – 3.5% of the withdrawn amount or Rs. 250 (whichever is higher).
-SBI Card – 2.5% of the amount withdrawn or Rs. 500 (whichever is higher)
-ICICI Bank – 2.5% of the withdrawn amount subject to a minimum of Rs. 300 (except ICICI Emeralde Credit Card that has a zero cash advance fee)
-Axis Bank – 2.5% of the withdrawn amount or Rs. 250 (except for Axis Bank Burgundy Private & Magnus Credit Cards).
No Interest-Free Period
When you make purchases using a credit card, you get an interest-free period to repay your credit card bill. The interest-free period is the time period between the day when you make a transaction and the payment due date.
No interest is accrued on your outstanding amount if your past dues are clear and the interest started accruing only if you don’t pay your bill by the payment due date. But, the interest-free period is not applicable on certain transactions, including cash advances. It means, when you withdraw cash using your credit card, the interest starts accruing on it from the very next day and you don’t get an interest-free period for this particular transaction.
Cash Advance Limit
Many people wrongly assume that they can withdraw 100% of their credit limit from their credit card, which is not true. Your card issuers provide you with a cash advance limit, which is a percentage of your total credit limit and can vary from card issuer to card issuer. you can withdraw cash only up to your cash advance limit and not more than that. For example, if your credit limit is Rs. 2 lakhs and the cash advance limit is 40%, then you can withdraw cash only up to 80,000 using your credit card and not more than that.
When Should You Withdraw Cash Using Your Credit Card?
Withdrawing cash using a credit card is never a good idea until it’s really an emergency. Emergency requirements are the only reason why card issuers provide the cash advance facility on credit cards. If you are outside and forgot to carry cash, but urgently need to do a transaction that can’t be done using your credit card, then you should undoubtedly go for it, but you should always prefer making transactions using your card and not by using the credit card cash advance facility. Even if you withdraw cash in an emergency situation, try to clear your dues as soon as possible because the high-interest charges might really feel like a burden to you otherwise.
Now, you must have understood why it is not a good idea to withdraw cash using your credit card. You are not only charged a fee for the same but also don’t get an interest-free period to repay your dues. Still, if you think that you make cash withdrawals very often with your credit card, you should look for a credit card with no/low cash advance fee, such as the Axis Bank Burgundy Private Credit Card. However, you should not think twice before availing of the facility when you are really in urgent need of cash. But, try avoiding it as long as you can. If you have any further doubts/queries regarding the credit card cash advance facility, you can freely ask us in the comment section below!