Withdrawing Cash On Your Credit Card: Know the Different Expenses

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    At several of the instances you may be hit with a cash-crunch situation and to tide it credit card come as an easy option providing instant loan with no documentation or approval. While at an initial stage, the financial crisis at hand can be averted to an extent by withdrawing funds on credit card, individuals at a later stage realize the hefty cost associated with such loans that in some of the cases goes even beyond 36% on an annualized basis.

    Withdrawing Cash On Your Credit Card: Know the Different Expenses
     

    Some of the charges levied on cash withdrawal facility on credit card include:

    1. Cash advance fees: This fee is levied each time the credit cardholder uses the card to access cash and generally ranges between 2.5% to 3% of the amount withdrawn subject to minimum charges of Rs. 300- Rs. 500. This amount is billed in the next statement of the credit card member.

    2. Finance charges: On all of the cash advances, card member is also charged a finance fee that is equal to charges on revolving credit or that charged on withdrawn amount. The charges will apply from the date of withdrawal until the date of full payment.

    3. Interest charges: Credit card carry interest rate charges i.e. levied at the monthly rate from the transaction date until the final repayment.

    All cash advances on credit card typically attract 2.5-3% interest on a monthly basis depending on the credit card and bank.

    Illustration of the net charges you incur on credit card withdrawal: Suppose you withdraw Rs. 10,000 on your credit card with cash advance fee of a minimum of Rs. 500 and interest rate charges of 3%, you will end up paying Rs. 10,800. This comes to be 8% per month or a whopping 96% on an annual basis. Nonetheless, if you spread your repayment, the total cost charged on the loan will come down.

     

    Remember there is no interest-free period on cash advances availed on credit card and it will continue to aggregate until the outstanding dues are cleared in complete. Also, such advances impact credit score of the borrower negatively even in a case when the minimum dues are not paid-off. So, one should make it a point to service this debt in a timely manner.

    Goodreturns.in

    Read more about: credit card interest rate
    Story first published: Saturday, September 15, 2018, 18:28 [IST]
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