How to Withdraw Cash Using Your Credit Card: A Complete Guide

Posted on Monday, April 15th, 2024 | By IndusInd Bank

Emergencies can arise anywhere, anytime; they don’t come with a warning. Hence, having a source for instant cash withdrawal can be a great relief. Many of you own a credit card. It can help with instant credit, but can you withdraw cash using your credit card? Yes, just like a debit card, your credit card can be used to withdraw money in need. However, this convenience comes at a cost. Let us understand the nitty-gritty of these withdrawals.

Things to Consider When Withdrawing Cash Using Credit Cards

Credit card cash withdrawals—also known as cash advances—aren’t the same as regular ATM withdrawals from your bank account. Here are a few key aspects you should be aware of:

Cash Limit

The limit on your credit card is offered for spending. Hence, the entire credit limit amount will not be available to withdraw cash from a credit card. The cash limit is usually 20% to 40% of your credit limit, depending on the bank. Hence, aim for a higher credit limit to be able to withdraw more cash as an emergency fund.

Also Read: How to Improve Your Credit Card Limit?

Fees & Charges

The cash withdrawal option on even the best credit cards should be your last resort as there are many charges involved, which you must be aware of before you apply for credit card:

1. Cash Advance Fees: Credit cards provide credit for spending. When cash is advanced, a fee must be paid, generally 2.5% to 3% of the transaction amount, with a minimum of ₹250 to ₹500. Induslnd Bank Samman Rupay Credit Card for Government officers offers Zero Cash Advance fee.
   
2. Finance Charges: Like other transactions, cash withdrawals are also subject to finance charges on the outstanding amount from the day of the transaction until repayment.
   
3. ATM Fee: Withdrawing cash from the ATM also attracts fees for more than five monthly transactions.  
   
4. Late Fees: If you cannot pay the amount withdrawn by the due date, you must bear the late fees, ranging from 15% to 30%. This is similar to purchases and other spending.

Interest

Regular credit card usage attracts interest from the due date until the outstanding is paid, so the holder gets a grace period. However, in case of withdrawal of cash from credit card, interest is charged from the time of withdrawal to clearance. So, from the day of the transaction until the day of payment, a monthly rate of 2.5% to 3.5% is charged on the transaction amount.

Credit Score

Withdrawing cash does not impact your credit score. However, the charges accompanying the withdrawal can add to the already existing cash crunch, driving you towards a debt trap. So be mindful of exercising this option and clearing dues as soon as possible.

Rewards

Credit card issuers entice holders with many benefits, such as cashback, rewards, air miles, waivers, etc. These could be for shopping, dining, travel, and so on. If used correctly, these rewards can be beneficial. IndusInd Bank understands that utilising all reward points before expiry gets stressful and hence offers lifetime rewards. However, no reward points are awarded when you withdraw cash from the credit card. Hence, using the cash withdrawal option only when in absolute need is wise, even for the best credit cards.

Steps to Withdrawing Cash Using a Credit Card

Withdrawing cash from your credit card is straightforward. Here’s how to do it:

1. Locate an ATM: Find a bank ATM that accepts your card network (Visa, Mastercard, RuPay, etc.). You can also use your issuing bank’s ATM.
2. Insert Your Credit Card: Just like a debit card, insert your credit card into the ATM.
3. Enter Your PIN: Use the 4-digit PIN assigned to your credit card.
4. Select ‘Cash Withdrawal’ Option: Choose the withdrawal option on the screen.
5. Enter Amount: Type in the amount you wish to withdraw (within your cash limit).
6. Confirm and Collect Cash: Once approved, collect the cash along with your receipt. Keep an eye on any immediate SMS alerts about the charges applied.

Summing Up

Credit card cash withdrawals can be a helpful financial backup during urgent situations, but they come with high costs. The absence of an interest-free period and the addition of advance fees make it important to use this feature cautiously. If you must withdraw cash using your credit card, repay the amount as soon as possible to minimise interest and protect your credit score. Always know your card’s terms—and use the feature only when truly necessary.