Credit Card Cash Withdrawal Explained

Using a credit card to withdraw cash from an ATM may seem convenient during emergencies, but it is one of the costliest ways to access funds. Many cardholders are unaware of the high charges involved and the long-term impact on their finances.

What Is Credit Card Cash Withdrawal

Credit card cash withdrawal allows you to withdraw a portion of your credit limit as cash from an ATM. This amount is treated differently from regular card purchases.

Cash Withdrawal Charges You Should Know

When you withdraw cash using a credit card, the following charges apply

• Cash advance fee charged as a percentage of the amount withdrawn
• Interest charged from the same day without any interest-free period
• GST applied on the interest and cash advance fee

These charges make cash withdrawal significantly more expensive than regular card usage.

How Interest Is Calculated

Unlike normal purchases, interest on cash withdrawals starts immediately from the transaction date. The interest rate is usually very high and can go up to forty percent per annum or more.

Impact on Your Credit Utilization

Cash withdrawal increases your outstanding balance instantly. This can raise your credit utilization ratio and negatively impact your credit score if not repaid quickly.

Why You Should Avoid Credit Card Cash Withdrawal

• No interest-free period
• High finance charges
• Additional fees and GST
• Negative impact on credit score
• New purchases also start attracting interest until the balance is cleared

Smarter Alternatives to Cash Withdrawal

• Use a debit card or savings account
• Opt for personal loan or overdraft if needed
• Use wallet transfers or UPI linked to bank account
• Ask your bank about emergency credit lines

When Can Cash Withdrawal Make Sense

Only in extreme emergencies when no other funding option is available. Even then, the amount should be repaid immediately to minimize interest charges.

Final Thoughts

Credit card cash withdrawal should be treated as a last resort. Understanding the charges can help you avoid unnecessary financial stress and keep your credit health intact.