Everything you Should Know About Credit Card Cash Advance Fee
If you are low on money, one of the transactions that you can make on your credit card is cash advance, meaning obtaining the cash from your credit card within your credit limit, either from ATM, bank, or online banking. It does sound tempting, convenient, and just like a debit card withdrawal, but you should know it's nothing like a debit card withdrawal. A credit card cash advance is borrowing money from the bank, and it has to be repaid just as you do with other transactions you make on your credit card. Credit card cash advance should only be availed in case of extreme emergencies and should be repaid as soon as possible.
Credit Cash Advance Charges
Credit Cash Advance is a different kind of transaction, and hence, it's treated differently. This transaction, just like any other transaction carries some charges with it, but charges on a credit cash advance start getting accrued the moment you withdraw the cash. Whereas, in the case of all other credit card transactions, charges start getting accrued if you miss out on your payment due date.
Since credit card cash advance is more on the expensive side, here are few things you should consider before making this transaction:
● Advance Fees
Credit card cash advance comes with a fee called credit card cash advance fee which either depends on the amount of your transaction, or the method your creditor uses to calculate the fee. Most creditors charge either a percentage of cash advance or a flat credit card cash advance fee, whichever is greater.
Typically banks charge either a flat credit card cash advance fee which varies from 300 INR to 500 INR, or 2.5% to 3% of the amount withdrawn. For Example, RBL charges 2.5% as a credit card cash advance fee which is payable only once, and its flat fee starts from 100 INR.
● ATM Fees
In addition to the credit card cash advance fees, you’ll be charged ATM fees too as a percentage of the amount withdrawn, depending upon which bank’s ATM you are using.
● High Interest
You’ll pay less interest on other credit card transactions, but you’ll pay a higher amount of interest on the credit card cash advance since its accrual period starts off the moment the cash is withdrawn.
Since banks must display these terms and conditions prominently on the brochure or website, you should always go for the lowest interest rate credit cards which will not only help in credit cash advance but also in other credit card transactions.
● No Grace Period
Since the accrual period starts from the date of the transaction, you don’t get a grace period to pay the amount you withdrew.
Can a Credit Card Cash Advance Fee be avoided?
The only way that you can avoid these charges are by not taking credit card cash advance at all, but in case it a mandated requirement, you can reduce the amount you are withdrawing, and since the interest starts accruing from the date of transaction, try paying it as soon as possible which will lower your interest amount.
Swiping the credit card to make a purchase is always a better option than making a credit card cash advance.
Impact of Credit Cash Advance on Credit Score
Since it is a credit card transaction, it will impact your credit score, but won’t come up in your report. A credit card cash advance can only impact your credit score if you withdraw too much money because in that case, you draw closer to maxing out your credit limit or crossing 30% of your credit limit utilization ratio.
The cash advance can be a good resource under some circumstances. However, the customer needs to go through the agreement and terms and conditions, including credit card cash advance fees, and interest charges before proceeding with the transaction.