Is there a penalty for withdrawing cash on credit card?

Cash Withdrawal Penalties on Credit Cards

Many credit card issuers impose a penalty for withdrawing cash on your credit card. This fee is generally a percentage of the withdrawal amount, typically ranging from 2.5% to 3%. Additionally, there may be a minimum charge of ₹250 to ₹500, even for small withdrawals.

Why the Fee?

Credit card companies charge a cash withdrawal fee for several reasons:

• Higher Risk: Cash withdrawals are considered higher risk transactions compared to regular purchases because there is no physical good or service associated with them.
• Interest Charges: Cash advances do not receive the same grace period as regular purchases, meaning interest accrues from the date of withdrawal.
• Convenience Charge: Credit card companies offer cash withdrawal as a convenience, which they charge for.

Impact on Your Credit Card Bill

The cash withdrawal fee appears on your credit card billing statement as a separate charge. It is important to note that this fee is in addition to any interest charges that may be incurred on the withdrawn amount.

Avoiding Penalties

To avoid cash withdrawal penalties, consider the following alternatives:

• Debit Card: Use a debit card linked to your checking account for cash withdrawals. Debit cards typically do not charge fees for withdrawals at ATMs operated by your bank.
• Personal Loan: If you need a larger amount of cash, consider taking out a personal loan from a bank or credit union. Personal loans typically have lower interest rates than credit card cash advances.
• Balance Transfer Credit Card: A balance transfer credit card can be used to move your existing credit card debt to a card with a lower interest rate and no balance transfer fee.

Conclusion

Cash withdrawals on credit cards often incur a fee. By understanding the penalties and exploring alternative options, you can avoid these additional charges and manage your credit card debt more effectively.