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Essentials of Credit Card cash withdrawal

4 min read Dec 28, 2023

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Credit Cards have become indispensable in modern financial management, offering more than just a means to make purchases. Credit Cards, known for their user-centric features, provide the added benefit of cash withdrawals. This facility, however, comes with specific parameters like withdrawal limits, associated charges, and interest rates that users must be aware of. This blog aims to dissect these elements, offering a comprehensive understanding, particularly for Credit Card holders.

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.

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 Percentage of withdrawn amount: A variable fee based on the amount withdrawn.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For example, for Axis Bank Select Credit Card, the cash withdrawal fee is 2.5% of the withdrawn amount, subject to a minimum of ₹500.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.

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