Credit card cash withdrawal: Key details about credit card cash withdrawal limit, fees and charges you need to know

Credit cards are a great payment mechanism for quick online shopping. Their popularity comes from ease of use, quick approval and attractive rewards. Many lenders offer cards, which are issued with minimal paperwork and even offer instant virtual access.
However, the use of credit cards go beyond just swiping for online purchases. Credit cards also let you withdraw cash when needed. This feature adds to the card’s convenience, especially in emergencies. However, cash withdrawals through credit cards come with extra charges, interest and limits. So while handy, they should be used carefully and only when truly necessary.

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What You Need To Know About Credit Card Cash Withdrawal Limits:

Credit cards typically come with a cash withdrawal limit, which is a set portion of the overall credit limit that your bank has approved for you. This limit usually ranges from 20% to 40% of the total credit available.
The cash advance limit varies from card to card and can change based on several factors. These include your spending habits, repayment behavior and overall credit history.

Credit Card Cash Withdrawals Advance Fee:

Each time you withdraw cash with your credit card based on this limit, your bank will charge a fee from you. This fee will typically be between 2.5% and 3% of the amount that you wish to withdraw. Some lenders also charge a minimum fee of Rs 250 for cash withdrawals made using a credit card. Hence, it is important to carefully review your bank’s terms and conditions before signing up for your credit card.

Credit Card Cash Withdrawals Interest Rates:

Typically, credit card cash withdrawals begin accruing interest from the date of the withdrawal. This interest is charged monthly from the transaction date until full repayment is done to the lender. While these rates can vary from one bank to the other, lenders usually charge interest rates starting from 2% onwards and can go up to 3.5 or 4% per month.

Credit Card Cash Withdrawals Alternatives:

Buy Now, Pay Later: When in need of emergency funds, one may consider applying for BNPL loans or ‘Buy Now, Pay Later’ loans. This scheme lets shoppers pay for their purchases in small installments over time. It usually comes with lower fees and minimal to no interest compared to cash advances on credit cards. Borrowers usually need to make a small down payment in this scheme, while the remaining amount can be paid over time based on the agreement.
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Personal Loan:

A personal loan offers a fixed amount of money with a set repayment schedule. Several banks and non-banking financial institutions offer these loans, starting at around 10% interest rate p.a. Compared to credit card cash withdrawal, these loans are cheaper and a safer borrowing option. Indian lenders are offering personal loans up to Rs 55 lakhs. However, eligibility is impacted by factors such as credit score, income, financial behavior, among other things.

Family and Friends:

If someone is in urgent need of cash, they may also consider borrowing money from close trusted friends or family. This is the best option to avoid any extra cost or penalty compared to credit card cash advances or personal loans. However, it’s important to set clear terms and communicate openly with your close aides to avoid any misunderstandings.

Emergency Funds:

Financial experts always recommend setting up an emergency fund that can take care of your needs during unexpected emergencies. In certain unexpected instances, one can use their emergency funds instead of opting for loans or credit card cash advances. This helps avoid falling into a debt trap and also spares you the uncomfortable conversations about borrowing money from friends or family.

Conclusion

While credit card cash withdrawals can be a quick fix in emergencies, they come with high costs that can easily snowball into debt if not managed wisely. Always review your withdrawal limit, fees, and interest charges before opting for this route. Consider safer alternatives like personal loans, BNPL, or even tapping into your emergency fund to avoid unnecessary financial strain. Used responsibly, your credit card remains a powerful tool for convenience and rewards—just ensure cash advances are your last resort.