Credit Cards offer many benefits, from online purchases and utility bill payments to paying your monthly rent. Automating your monthly payments and paying them through your Credit Card spares you the hassle of remembering to pay them on time. Credit Cards are not meant for cash withdrawals since they have high charges associated with them. To help you avoid these charges or at least minimise them, there are some tips you can follow. If you are wondering how to avoid paying Credit Card cash withdrawal charges or minimise them, we’ve got you covered. Read on to explore various ways you can follow to avoid such charges.
What are the Charges Associated with Credit Card Withdrawals?
Credit Cards are primarily meant for making online and offline purchases, not withdrawing cash. For these reasons, every cash withdrawal using these cards involves some charges.
Furthermore, it is advisable to use Credit Cards to withdraw cash only in emergencies. When you suddenly need money, let’s say for a medical emergency, use the cash advance facility offered by Credit Cards. However, using this facility might incur some charges.
Here are some charges associated with the cash advance facility:
Cash Advance Fees
When you use your Credit Card for withdrawing cash, financial institutions generally charge you 2.5 to 3% of the total amount withdrawn as cash advance fees. The fee is applicable for every cash withdrawal you make.
The rate charged differs from one financial institution to another.
Along with a cash advance fee, interest charges are to be paid every time you withdraw cash with your Credit Card. But the difference between this and other purchases is that you don’t get the “interest-free period” to settle your debts.
In Credit Card cash withdrawals, interest accrues from the very next day.
How Can You Avoid Charges While Making Credit Card Withdrawals?
Cash withdrawal using Credit Cards involves some charges, but some exceptions exist. Follow the tips discussed below and withdraw cash, paying little or no charges.
- Limit Cash Withdrawals: You must consider limiting cash withdrawals from your Credit Card to situations where it is essential. Instead, try alternative methods of obtaining cash, such as using a Debit Card or making online transfers from your bank account, which may have lower or no fees associated.
- Use a Debit Card: Rather than utilising a Credit Card for cash withdrawals, use a Debit Card linked to your bank account. Debit Cards are developed to access funds directly from your account, eliminating the need for cash advances and associated fees.
- Plan Ahead: If you think you will need urgent cash soon, withdraw it from your bank account before the need arises. With cash on hand, you can avoid the need for last-minute Credit Card cash withdrawals.
- Check for Fee Waivers: Some Credit Cards can offer fee waivers for cash withdrawals or advances. You must review the terms and conditions of your Credit Card or contact your card issuer to check if they provide any fee waivers for cash advances.
- Pay off your Credit Card Balance Quickly: If you need to make a cash withdrawal using your Credit Card, aim to pay off the balance as soon as possible. You can minimise the interest charges on the cash advance by paying it off quickly. This helps to lower the overall interest charges you will incur. It is advised to prioritise paying off the cash advance balance over other balances on your Credit Card, as the interest rates on cash advances are higher than those on regular purchases.
- Read the Fine Print: Familiarise yourself with your Credit Card’s terms and conditions, particularly regarding cash withdrawals. You must comprehend the fees, interest rates, and any applicable grace periods associated with cash advances. This understanding will help you make informed decisions and avoid pitfalls.
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Credit Cards are best suited for making online payments for various purposes. You can expect many credit card benefits when you make payments through them, like cashbacks and rewards.
While a Credit Card offers a cash advance facility, many Credit Card cash withdrawal charges are associated with it. You can avoid interest charges by paying the dues promptly. Given all the charges associated with cash withdrawal, you should only utilise it for emergencies.