Credit Card Cash Withdrawal: Process, Fees, Benefits & More

Credit cards have evolved into an indispensable tool for managing our finances in today's fast-paced culture. They provide convenience, security, and several benefits. 

Credit cards, like debit cards, allow you to withdraw cash from ATMs as well as make payments at various online and offline merchant businesses. However, withdrawing cash with a credit card is not as simple.

In this article, we'll explore what credit card cash withdrawal is, its benefits and drawbacks, and more.

What is Credit Card Cash Withdrawal?

Credit card cash withdrawal allows you to withdraw money from an ATM or bank with your credit card. This means you can withdraw a portion of your credit limit in physical cash. This is very useful in emergencies or when dealing with businesses that do not take credit cards. This convenience is quite handy in an emergency, but it comes with certain costs and interest.

How to Withdraw Cash from a Credit Card?

Here's a step-by-step guide on withdrawing money from your credit card:

• You must locate an ATM because you can only withdraw cash from an ATM.

• In the ATM card slot, enter your credit card.

• Select 'Cash Advance', 'Cash Withdrawal', or similar alternatives.

• Enter your withdrawal amount.

• Enter the PIN to confirm the transaction. With some cards, you may additionally receive a one-time password (OTP) to your registered mobile number, which you must input to complete the purchase.

• After the transaction is authenticated, the machine will dispense the cash.

• Collect cash and credit cards.

• Once the transaction is complete, your card issuer will notify you of the used and available credit limits.

Features of Credit Card Cash Withdrawal

Here are the features of credit card cash withdrawal:

• The basic feature of a credit card is to make card transactions; cash withdrawal is only an additional feature of credit cards supplied by banks.

• Users can take cash from their credit card just up to the permitted limit and no more.

• The maximum limit of credit card cash withdrawal can differ from bank to bank.

• Users will have to pay additional costs along with interest on the withdrawn amount when using a credit card.

• Not all banks/credit card issuers offer credit card cash withdrawals.

Charges on Credit Card Cash Withdrawal

Users must pay additional fees when withdrawing cash using their credit card because it is not a standard feature provided by banks. These additional fees are known as a 'credit card advance fee'. When a user withdraws cash with his or her credit card, a cash advance fee is paid based on the amount withdrawn.

• Banks typically charge between 2.50% and 3% of the amount withdrawn for each credit card cash withdrawal transaction.

• The cash advance fee will be added to your bill for the following month and included in your billing cycle.

• The cash advance cost also includes a finance charge, which is calculated at a rate similar to that of the withdrawn amount. This amount will be levied from the date of withdrawal until the date of payment in full.

• It is crucial to note that even if you make many cash withdrawals using your credit card in one day, you will have to pay the cash advance fee for each transaction that you complete, based on the withdrawal amount.

How to Avoid Charges on Credit Card Cash Withdrawal?

Credit card cash withdrawals usually come with a fee that amounts to a certain percentage of the withdrawn amount, typically 2.50% to 3%. On top of that, a high interest rate is applied to the withdrawn amount which starts accruing the day after the transaction.

Here are a couple of ways you can reduce the amount of charges you pay for credit card cash withdrawals.

• Use a Credit Card with No Cash Advance Fee

The best way to avoid credit card cash withdrawal fees is to have a card that does not charge you for cash withdrawals. Such cards are usually premium or have high annual fees.

Some cards offer low cash withdrawal fees along with a nominal annual fee like the Kotak Fortune Gold Credit Card. Here is a list of credit cards with low cash withdrawal fees.

• Transfer Funds to e-Wallets Before Withdrawing Cash

You can use your credit card to top up an e-wallet like Paytm and use that money to make your payments. If you need cash you can also transfer the funds from your e-wallet to your bank account.

e-Wallets charge a fee for topping up with credit cards but it is typically less than the fees charged for direct cash withdrawal using a credit card.

Keep in mind that the amount withdrawn will be from your credit limit and not your cash limit.

Alternatives to a Credit Card Cash Withdrawal

There are few alternatives to credit card cash withdrawal. They are:  

Credit Card loans: Aside from the fixed monthly limit, you can use your credit card to take out loans. The application and repayment process is identical to other loans, with different interest rates depending on your card, loan amount, and so on.

Personal Loans: Personal loans allow you to borrow funds for a variety of purposes at affordable interest rates. The processing time is considerably reduced, allowing you to address crises and other needs.

Collateral Loan: If you need a large sum, you can use a financial asset as collateral and get a loan. Some examples of financial assets are mutual funds, equities, and real estate.

Salary Advance: You might request a pay advance from your company. If you've been with the same company for a while, your boss may be willing to give you an advance without any fuss.

Now that you are aware of how to withdraw money from a credit card, make sure you only do so when you have no other option to deal with an expense. If you use credit cards, cash withdrawal is a low-cost, rapid, and convenient option.  Unlike typical credit card transactions, which incur interest when bills are not paid on time, credit card cash advances accrue interest from the day of the transaction. To reduce the stress associated with bill payment, withdraw a smaller amount and repay it as soon as possible.