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Cash Advance: In case of sudden need of money, many people adopt the method of withdrawing cash from their credit card. This method may seem simple, but it is one of the most expensive credit options.
New Delhi. If you withdraw cash from your credit card by going to ATM, then be careful. This facility may seem easy, but it may cause you huge financial loss. Actually, withdrawing cash from credit card (Cash Advance) is completely different from normal debit card withdrawal, because there is neither any interest-free period in it nor is it a cheap deal. Heavy interest and fees are also associated with this.
Cash advance means that you withdraw cash from your credit card from ATM or bank. The amount withdrawn is deducted from your credit limit. There is a cash advance fee of 2.5% to 3% and interest starts accruing from the same day. There is no interest-free period here.
Benefits of cash advance-
- Instant Money: This can prove helpful when you need cash in an emergency.
- No Documentation: There is no paperwork like a loan.
- 24×7 facility: Money can be withdrawn from any ATM in India and abroad.
- No approval: The bank does not approve the loan separately.
- Flexibility: The money can be used for any necessary expenditure.
Disadvantages of cash advance-
- Heavy interest rates: Interest ranging from 35-45% per annum, applicable immediately.
- Fees and Charges: Cash advance fees and ATM charges increase your costs.
- No Reward: No reward points or cashback are available on this transaction.
- Impact on credit score: Frequent cash withdrawals weaken your credit worthiness.
According to experts, cash advance should be used only in times of crisis and for a limited amount. If this is done repeatedly, both interest and debt can increase rapidly. It is better to choose personal loan or ‘Buy Now, Pay Later’ (BNPL) option for planned expenses. These will prove to be cheap and credit-friendly.
