As the name suggests, a cash withdrawal facility on a credit card is a unique feature that enables users to withdraw cash up to a permissible limit from the ATM. The amount withdrawn can be considered as a short-term advance payable before the payment due date for a given billing cycle. Even though credit cards are usually designed for card transactions, card issuers offer this cash facility to make financing more convenient.
Also, the amount you can withdraw depends on the cash withdrawal limit set by the lender. However, users often confuse between credit limit and cash withdrawal limit. The credit limit is the maximum amount that can be spent, whereas, cash withdrawal limit remains as a percentage of the credit limit on a card.
The cash limit can vary from 20% to 40% of the credit limit depending on the card issuer. The withdrawal option comes with its set of advantages and disadvantages. Have a look.
Pros and cons of cash withdrawal facility:
To maximise the usage of cash from credit card facilities, you must know how it benefits or how an unplanned usage can hurt the cardholder.
- Zero documentation and approval
Individuals don’t require to go through any additional documentation or approval processes to avail cash from credit card. With no additional requirement, this facility allows cardholders to meet their cash requirements with ease.
- Immediate availability of cash
The most critical advantage of this credit card feature is that individuals can access liquid cash instantly. ATMs are available everywhere with around the clock service. Thus, individuals can access this extended facility by visiting a nearby ATM anytime they need cash, especially during emergencies.
- Extensible limit
With responsible use of the card and making bill payment in time and in full, the lender can easily assess you as a responsible customer. You can thus request the issuer to enhance the credit limit. Such an increase thus automatically leads to an extension in the cash limit.
- Interest-free period
While many card issuers charge interest on ATM widrawal, with the right issuer, you can withdraw from your credit card and repay within an interest–free period of up to 50 days.
You can plan on the withdrawals as per the billing cycle and take advantage of this feature.
For instance, cards like the Bajaj Finserv RBL Bank SuperCard come with the interest-free cash withdrawal feature on it.
Furthermore, this financial institution also brings pre-approved offers that help to make the card approval process easy and simple while saving time. If individuals are availing their other financial products like personal loans, business loans, etc., they can also get benefits from the offer. Also, with simple steps like submitting their name and contact number, applicants can check their pre-approved offer online.
As the facility makes financing convenient, there are no such disadvantages if it is used wisely. However, one can take care of the following points.
- Charges on non-timely payment
The facility gives access to an advance without any charges. However, the dues of your payment card must be paid in time, at least up to the minimum amount due. Not doing so will result in charge levy at high rates.
Also, it is advisable that you make bill payment in full and in time, which will help maintain your creditworthiness.
- Reward programs
Reward programs are one of the popular attractions of a credit card. Individuals earn rewards points, offers, vouchers, coupons, discounts, etc. on card transactions and they avail considerable benefits from it.
However, users are not able to avail any reward points on cash withdrawal. Regardless of the size of transaction, a cash advance facility doesn’t involve any incentive. So, in case you do not need emergency cash, you can divert the usage to card transactions.
There are both advantages and disadvantages of this additional facility, but during emergencies, individuals can fulfill their requirements if they know how to use a credit card wisely.
Nonetheless, it is preferable to have access to this facility on a card. Hence, borrowers need to look for a credit card that comes with a cash advance facility.
Note that the credit history of cardholders doesn’t get affected by availing cash facility on a credit card if the users repay the total payable amount before due dates. At the end of the billing cycle, the total due amount includes the withdrawn cash amount mentioned separately on the statement. So, it is important to know how to read a card statement correctly so that you keep track of spends.