These days, credit card usage has skyrocketed. They’re super handy for shopping and can come in clutch for cash withdrawals during emergencies. But before you pull out cash from your credit card, it’s crucial to understand some key terms and conditions to avoid any financial headaches.
Cash Advance Fee
When you take out cash from your credit card, the bank slaps on a cash advance fee, typically around 2% to 3% of the amount you withdraw. This fee will show up on your credit card bill. For instance, if you withdraw Rs 10,000 and the fee is 3%, you’ll end up paying an extra Rs 300.
Interest Rate Calculation
Interest kicks in right away when you withdraw cash from a credit card, unlike purchases where you get a bit of a grace period. The interest rate can range from 24% to 48% per year, starting from the day you take out the cash. If you miss a payment, that interest can really pile up.
No Grace Period Perks
Normally, there’s a grace period of 20 to 50 days for credit card purchases where you don’t have to pay interest. Unfortunately, that grace period doesn’t apply to cash withdrawals.
Cash Limit
Each credit card has a cash limit, which is usually between 20% to 40% of your total credit limit. If you try to withdraw more than that, your transaction might not go through.
Not paying back your cash advance on time can hurt your credit score. A low credit score might make it tough to get loans or new credit cards down the line.