We all know that credit cards are used for purchasing goods. But you can also withdraw money by credit card. Credit cards can be used to borrow money for a specified period. However, many terms and conditions have been kept to withdraw money from it, about which let’s know from the expert.
1. Credit – Cash Limit
In addition to the standard limit of credit, also known as the card limit, the credit card issuer also offers a separate cash limit of credit, also known as the cash withdrawal limit. The Cardholder can use the Card to withdraw cash as per requirement from any bank’s ATM or CDM.
A credit limit is the maximum amount that a person can spend on his credit card. The issuing bank decides this limit on the basis of the applicant’s annual income, credit history,
banking track record, or any other eligibility criteria. After setting the credit card limit, a cash withdrawal limit is set which is usually 10- 15 percent of the total credit card limit.
2. Interest charges on cash
When a cardholder withdraws cash from a credit card, he is charged a fee called a credit card cash advance fee. This fee usually ranges from 2.5-3 percent of the withdrawn amount with a minimum of Rs 300-500. Also note that if the payment is not made within the stipulated time period, the cash advance fee attracts interest at the same rate as the withdrawal amount. If at any point in time, you use your Credit Card in excess of the prescribed limit, you will be liable to pay charges on your total outstanding balance in excess of the Credit Card limit. This is usually charged at 2.5 percent of the excess amount with a minimum charge of Rs 500.
3. Benefits of Cash Limit
It also helps to arrange cash in case of emergency. If you have a credit card with a cash limit, you can withdraw cash as needed from any ATM. Since you have already completed the necessary documents on the basis of which you have got the credit card and you already have the prescribed cash limit, you do not need to complete any formalities. You can withdraw cash directly from any ATM. Credit card cash withdrawal charges are lower than market borrowing charges and don’t have to go through the stress of emergency situations. Also, note that cash withdrawal from a credit card does not affect your credit score.
4. There are advantages
A cash advance fee has to be paid against this service. You will also have to pay interest on the amount borrowed. If the payment is not made on time or is forgotten, a fine will have to be paid. The cardholder has to return the borrowed money to the lending bank within a specified period, usually 45 days. If there is a delay in payment, the cardholder has to return the borrowed amount along with interest and penalty. Failure to pay the dues on the due date can also impact the credit score. When you withdraw cash from a credit card, the withdrawal is recorded in your credit file. This can increase the dependence of the person on it. This may affect the ability to take loans in the future.
