Why You Should Avoid Using a Credit Card for Cash Withdrawal?

Credit cards help us live a hassle-free life by offering much-needed financial independence. The plastic money comes in handy at the time of making a booking while planning a vacation or in case of medical emergencies. Among all the features, credit cards also allow you to withdraw money from the ATM. However, you should avoid credit card cash withdrawals as you will end up paying more money in the form of charges and fees. Here are some of the reasons why it does not make any sense to withdraw money using a credit card: 

• Heavy cash advance fees 

Is simple term, cash advance fees are similar to transaction fees. When you withdraw cash from an ATM using a credit card, you are charged with a fee. Generally, the fee ranges from Rs.300 to Rs.500 or 2.5% to 3.5% of the withdrawn amount. For example, if you are withdrawing Rs.10,000 using a credit card, you will have to pay Rs.250 or Rs.350 as the cash advance fee. The cash advance fees reflect in the next month's credit card billing statement. In comparison, when you withdraw cash from ATM using a debit card, you will not be charged with a heavy fee. The charges for withdrawing cash from ATMs of other banks ATMs usually fall in the range of Rs.25-30. 

• Interest rate 

In addition to cash withdrawal charges, you will also have to bear the interest rate which is charged on cash withdrawn. The interest rate can be up to 4% per month (48% p.a.) depending on the bank which issued the card. Banks calculate the interest rate from the date of the transaction is made until you make the full payment. The longer it takes you to pay off a cash advance, the more interest you will accumulate. Therefore, withdrawing money using a credit card is an expensive affair.  

• Can affect your credit score 

Credit card cash advance can have a negative effect on your credit score. It suggests that you are not in a good financial status. If you fail to pay the minimum amount due or delay the payment, it can take a tollon your credit score. Make sure to pay all your credit card bills on time. 

• No benefit from cash withdrawals 

One of the most important features of credit cards is that it offers reward points and benefits. However, when you withdraw cash using a credit card, you don’t get any rewards or benefits. Even if the cash withdrawal amount is high, you will end up not getting any points. On the contrary, you will have to pay more money for the charges. 

It is important to keep an eye on your credit card bill and think twice before actually withdrawing cash using credit card.