How to Withdraw Cash from a Credit Card: Pros & Cons, Charges

Credit cards in India are becoming increasingly popular for their convenience of instant loans without extra hassle. By December 2024, their count rose to 10.80 crore from 5.53 crore in December 2019. Banks also allow credit cardholders to withdraw cash via ATMs through the Cash Advance facility. 

This blog highlights how to withdraw cash from credit card, its key benefits, drawbacks, applicable limits, associated fees, and other essential details. This will help you make informed decisions about using credit cards for cash withdrawals.

Key Highlights 

• Cardholders can withdraw cash from ATMs 24/7 using the cash advance facility.
• Provides immediate access to emergency cash without approval or documentation.
• Cash withdrawals come with high interest rates and additional fees.

What are the Steps to Withdraw Cash from a Credit Card? 

Here is the answer to how to withdraw cash from a credit card in some simple steps:

1. Find a nearby ATM that supports credit card withdrawals.
2. Insert your credit card into the card slot.
3. Choose the “Cash Advance” or “Cash Withdrawal” option (or similar).
4. Enter the amount you wish to withdraw.
5. Confirm your transaction by entering your PIN.
6. If prompted, enter the OTP sent to your registered mobile for verification.
7. Wait for the transaction to be approved.
8. Collect your cash and credit card before leaving the ATM.

Note: Keep the ATM withdrawal option enabled in your credit card settings to avoid failure.

Advantages and Disadvantages of Withdrawing Cash Using Your Credit Card 

After understanding how to withdraw cash from credit card in ATM, understanding the potential disadvantages can help you avoid hefty charges:

Pros of Credit Card Cash Withdrawal

1. This facility gives you instant access to emergency funds by making cash available right when you need it.
2. There are no restrictions on choosing a specific ATM, and this facility is available 24/7.
3. Unlike other loans, cash advances do not require documentation or approval.
4. With timely payments and good credit history, you can increase the cash withdrawal limit over time.

Cons of Cash Withdrawal from Credit Cards

1. This facility comes with very high interest rates ranging from 39% to 45% annually.
2. Each cash withdrawal incurs a separate cash withdrawal charge (plus GST).
3. No reward points are applicable to cash withdrawals.
4. Unlike a 35 - 50 day grace period on purchases, the fees and applicable interest start instantly after the cash withdrawal.

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Limit Applicable for Cash Withdrawals 

It is important to understand the difference between your credit limit and cash advance limit. The credit limit is the total amount you can spend on your credit card. 

On the other hand, the cash advance limit is the maximum amount you can withdraw as cash. Generally, the cash advance limit is 20% - 40% of your credit limit. 

Example: A credit card has a limit of ₹80,000; the cash withdrawal limit may range from ₹16,000 to ₹32,000. 

The exact limit varies by card and depends on factors such as spending behaviour, repayment history, and overall credit profile.

Charges and Interest Applicable on Cash Withdrawal from Credit Card 

When you withdraw cash from your credit card, you will incur a cash advance fee and interest charges. The interest starts from the date of withdrawal until full repayment. 

The cash advance fee generally ranges from 2.5% to 3.5% of the withdrawal amount, with a minimum charge of ₹250 to ₹500 (plus GST). Additionally, an ATM usage fee of ₹100 to ₹150 may apply. 

Unlike regular purchases, cash advances do not have an interest-free period, and interest starts accruing immediately at high rates, often around 3.25% to 3.75% per month (39% to 45% annually). 

Credit Card Cash Withdrawal Impact on Credit Score 

While it may be a tempting option for fast and prompt cash needs, credit card cash withdrawal can impact your credit score. Since your credit utilization increases, it may show negatively on your credit report. Learn about credit card cash withdrawal impact on credit score below:

Higher Credit Utilisation Ratio (CUR)

Cash advances increase your CUR, and this may indicate over-reliance on credit and lower your CIBIL score.

Impact of Late Payments

Missing or delaying payments on the increased balance can significantly harm your credit score.

Potential Impact on CIBIL Score

Though treated as regular transactions, the associated high costs and frequent use of cash advances can still negatively impact your CIBIL score.

Credit card cash withdrawals can be helpful in emergencies, but they come with high fees, instant interest, and can hurt your credit score. 

It is best to utilise the process of how to withdraw cash from a credit card only when necessary, pay back quickly, and consider other alternatives to avoid hefty charges.

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