Cash advance by credit card: It’s the holiday season and offers, deals and discounts are everywhere. Some banks send SMS and email communication to their credit card customers to inform them of the various cashback and other offers available on the cards. One of these offers concerns the cancellation of cash withdrawal fees on transactions made during this festive period. Many card users receive messages asking for a 100% waiver of the credit card cash advance charge. If this is what you received, it could be a trap. Read on to find out why.
Credit cards come with a spending limit and a separate cash withdrawal limit also known as a cash advance to allow users to withdraw money from any ATM using their cards. . Unlike the expenses you make when shopping with a credit card, there are fees associated with these cash withdrawals. If the credit card company offers to waive those cash withdrawal fees during the festive offer, know the trap before swiping your credit card through the ATM.
On the expenses that you make in a commercial establishment such as Amazon, Flipkart, BigBazaar, or any store in your neighborhood, there is usually an interest-free period of up to 51 days. It is always best to pay off the entire outstanding balance on the due date and avoid credit carry-over. The interest rate charged on unpaid contributions if carried over to the next month is 36 percent to 42 percent depending on the bank.
In addition to expenses, a credit card allows you to withdraw money from ATMs when needed. However, there is a cash advance fee of approximately 3 percent of the cash amount withdrawn that must be paid once it is billed on the credit card statement. The SMS, the e-mail received speaks of the reversal of this charge for the holder of the credit card. But, if you think it’s free money for you until the next billing cycle, here’s the catch!
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The cash advance fee is only part of the story. The credit card holder is required to pay interest or finance charges equal to the charges on the revolving credit, on the money withdrawn from day one and there is no interest free period on the same. These fees are debited from the date of withdrawal until the date of full payment. In all credit cards from all banks, the financing charge on cash advances is applicable from the date of the transaction until full payment. On a cash withdrawal of Rs 20,000, there might be a charge of Rs 600, which will be waived but the interest charge will be deducted from day one. It is not free money for you that you can pay back at any time.
With a credit card in your wallet, you have to avoid the temptation of impulse buying at all costs. And, if you are running low on funds, explore all other options before going to an ATM to withdraw money using a credit card.