When it comes to using your credit card, you may think that you have the freedom to use it however you, please. However, there are certain restrictions and charges that you should be aware of, especially when it comes to withdrawing cash. In this article, we’ll take a closer look at credit card cash withdrawal charges, what they are, and how you can avoid them.
First, it’s important to understand that withdrawing cash using your credit card is different from using it to make a purchase. Withdrawing cash is considered a cash advance, and it’s subject to different fees and interest rates than regular purchases. These fees and rates can add up quickly, making it a more expensive option than using your debit card or taking out a personal loan.
So, what are the fees associated with cash withdrawals? The most common fee is the cash advance fee, which is a percentage of the amount you withdraw. This fee can range from 2-5% of the withdrawal amount and is typically around 3%. For example, if you withdraw $1,000, you could be charged a cash advance fee of $30.
Another fee to be aware of is the interest rate on cash advances. This rate is typically higher than the rate on regular purchases, and it starts accruing immediately. This means that if you don’t pay off the cash advance in full, you’ll be charged interest on the entire amount, not just the remaining balance.
In addition to these fees, some credit card issuers may also charge additional fees for credit card cash withdrawals, such as ATM fees or foreign transaction fees. These fees can vary depending on the card issuer and the location of the ATM.
To avoid these fees, the best option is to avoid credit card cash withdrawals altogether. If you need cash, it’s usually better to use your debit card or take out a personal loan. However, if you do need to withdraw cash using your credit card, there are a few things you can do to minimize the charges:
- Use a credit card with a low cash advance fee: Some credit cards have lower cash advance fees than others, so it’s worth checking to see if your card has a lower fee or if there’s a card that offers lower cash advance fees.
- Pay off the cash advance as soon as possible: Since interest on cash advances starts accruing immediately, it’s important to pay it off as soon as possible. This will help minimize the amount of credit card interest you pay.
- Use an ATM with your card issuer: Some card issuers don’t charge additional fees for cash withdrawals at ATMs that are part of their network.
- Use a credit card with a 0% intro APR on cash advances: Some credit cards offer a 0% intro APR on cash advances for a certain period of time. This can be a good option if you need cash but don’t want to pay interest.
Also Read: Guide on Credit Card Statement Balance vs Current Balance
In conclusion, cash withdrawals are a convenient option when you need cash, but they come with added fees and interest rates. By understanding the fees associated with credit card cash withdrawals, you can make an informed decision and minimize the charges. If possible, it’s best to avoid credit card cash withdrawals altogether, but if you do need to withdraw cash, make sure to use a credit card with a low cash advance fee, pay off the cash advance as soon as possible, and use an ATM with your card issuer.
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