If you are looking to access some cash from your credit card, then you can make a credit card withdrawal from your nearest ATM. The cash you withdraw is known as a cash advance. The amount an individual can withdraw depends on the credit card limit; individuals should be aware of their cash advance limit.
When to use a cash advance? If you urgently require some urgent funds, then a credit card cash advance can be a good option since there is no hassle of submitting documents or waiting for approvals. However, Individuals should carefully weigh their options before withdrawing money via credit card. This is because an interest rate is incurred when you take out a cash advance, meaning you will have to pay back more than what you withdrew.
Further, using a cash advance can damage your credit score, making it harder to apply for personal loans in the future. Therefore, a cash advance can be extremely useful in an emergency, but it is not the most fruitful option in a long-term scenario.
Important Things to Know About Credit Card Cash Advances
Below are some important terms, conditions, and costs of using a credit card cash advance. These points can help you decide whether your need for funds outweighs the cost that a cash advance incurs.
Cash Advance Fee: Every time you withdraw cash from your credit card, a fee is charged to your account. This fee is usually a small percentage of the amount you have withdrawn. This cost will be reflected in your monthly credit card statement.
Interest Rate: As mentioned, interest is charged on any cash withdrawals made using your credit card. The interest rate typically ranges from 2.5% to 3.5% and begins from the day you make the transaction, ending only when the amount is paid in full. Therefore, individuals should clear any credit card bills generated due to cash withdrawals at the earliest to ensure that costs are minimised.
Late Payment Fee: If you need even more incentive to clear your cash advance bills in time, you should consider the late payment fee consequence. Charges for late payments on a cash withdrawal can be anywhere from 15% to 30% of the amount owed. Hence, individuals should only take out a credit card cash advance if they plan to repay the borrowed amount within the stipulated timeframe. You can pay a credit card bill online for speed and efficiency.
Credit Cards: Many credit card reward points and discount deals are being offered to card holders. Taking advantage of these deals is the best way to get the most out of your credit card. Credit card EMIs offer attractive interest rates that can help buyers facilitate and manage costly transactions. However, individuals cannot avail of these benefits in a cash advance withdrawal. So again, individuals should remember to use a credit card cash advance only when necessary.
Credit Score: Cash advances may not damage your credit score in the short run, but their costs can drive up the monthly payments required for your credit card. Failure to meet these payments can drop a credit card holder’s credit card. Therefore, only withdraw amounts you know can re-pay in the foreseeable future.
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As can be seen, withdrawing cash from credit cards can be useful for individuals who require access to funds urgently. By keeping the costs incurred and the terms and conditions that apply clearly in mind, individuals can make the best decisions regarding credit card cash withdrawals.