Is Cash Advance The Best Way To Withdraw Emergency Cash?

Did you know you can withdraw money from credit cards from your nearest ATMs when in need? There are two different types of limits on your credit card:

• Credit limit

• Cash withdrawal limit

The credit limit is the total limit of your card for spending, be it for shopping or other transactions like paying your water or electricity bills. The cash limit allows you to withdraw a certain amount of your funds, usually up to 40%, at an ATM. 

The cash limit is directly communicated to you by the credit card issuer at the time of receiving your card. This limit depends on your credit behaviour and the policies of your credit card company. To know whether to use this facility, understand its charges as well as its pros and cons. 

Cash Withdrawal Charges

There are two types of fees charged on cash withdrawals using your credit card.

1. Cash Advance Fee: It goes up to 3% or more on the total amount you withdraw and is charged upfront by your credit card issuer.

2. Interest Charges: It applies to the total amount from the date you draw it to the time you repay and depends on the issuer. It may go up to 3.99% per month. 

How Cash Advance Affects Credit Score

Although there is no direct impact on your credit score, regular cash withdrawals can impact your finances and your creditworthiness. The interest rate and additional charges on this facility get added up and may be difficult to pay later if you are unable to manage your credit profile responsibly. 

There are huge financial implications of cash advances on non-repayment. A high interest fee is charged, making it more challenging to pay your total credit card dues on time. This can lower your credit score.

In other words, increased credit utilisation and the potential for late payments pose a threat to your credit score if you use this facility without careful planning. Finding out what is credit score before and after taking a cash advance can help you manage its impact better. 

Pros Of Cash Withdrawal Using Credit Cards

• Instant cash is available when you’re in need to address medical emergencies, urgent home repairs, your child’s education fees, etc. There is no restriction on time and location either. 

• There is no requirement to await approvals or submit extra paperwork while getting cash.

• Some issuers allow you to withdraw money from credit cards without any charges for a certain period of time. 

Cons Of Cash Withdrawal Using Credit Card

• The cash advance fee includes charges from the transaction date to the date of full repayment. This can add up and turn out to be an expensive option to get your hands on cash. 

• The interest rates on this facility are generally higher than taking loans and can accumulate if outstanding bills are not paid on time. 

• No reward points are earned on this transaction.

• There is no interest-free period on this facility. 

Handling Cash Advance Payment 

The outstanding balance on your credit card includes all your regular transactions and charges of a cash advance, if any. When you make a payment, it is allocated to your dues first and then towards cash advances. 

So, it is important for you to manage your outstanding balance carefully and clear your dues in full along with paying your interest fees and additional charges if you have withdrawn cash using a credit card. This will help you show responsible credit behaviour. 

How Can You Withdraw Cash Using Your Credit Card?

Here are the simple steps you can follow. 

1. Visit an ATM and insert your credit card into the machine 

2. Enter your PIN 

3. Select the ‘Cash Advance’ option

4. Enter your desired amount for withdrawal of cash as per your cash advance limit

5. Complete the steps as mentioned in the prompts and log out

While you can withdraw money from a credit card at any ATM, avoid using this feature too often and save money on additional charges. Remember, regular cash advances can damage your credit score. Timely payments and responsible credit behaviour can reverse the damage and help in rebuilding your credit history. 

If you are looking for an easy way to get access to cash and enjoy a range of other perks, get the One Credit Card. Through its OneCash feature, you can get a loan against your credit limit transferred to your bank account or UPI ID. 

It acts as a cash cushion in a financial emergency and comes pre-approved. You have no paperwork to do and can get cash in 30 seconds! What’s more, this metal credit card has other great money-saving features. Earn 5X rewards and use your card to get great discounts on dining, movies, shopping, paying your utility bills and much more. Apply now and enjoy financial freedom like never before.