Credit Card Cash Withdrawal Fees and Charges

credit card cash withdrawal, also known as a cash advance, allows you to withdraw cash from an ATM using your credit card instead of your debit card. The withdrawn amount is treated as a short-term loan from your card issuer.

How It Works 

• Insert your credit card into an ATM
• Enter your credit card PIN
• Choose the cash withdrawal option
• Withdraw money within your available cash advance limit

 

The amount withdrawn is added to your credit card outstanding balance and must be repaid along with your next bill.

Calculating credit card cash withdrawal charges involves two main components: cash advance fee and interest cost. Follow the steps below to estimate the total cost:

Step 1: Calculate Cash Withdrawal Fee

Most banks charge 2.5% of the withdrawn amount (or a minimum of ₹250–₹500).

Formula:
Cash Withdrawal Fee = Withdrawal Amount × 2.5%

Step 2: Calculate Interest Charges

Interest is charged from the day of withdrawal (no grace period). The average rate is 3.5%–3.75% per month.

Formula:
Interest = Withdrawal Amount × (Monthly Interest Rate ÷ 30) × Number of Days

Step 3: Calculate Total Cost

Add both fee and interest to get the total cost of withdrawal.

Formula:
Total Cost = Cash Withdrawal Fee + Interest Charges

Example Calculation

If you withdraw ₹10,000 for 10 days:

• Fee = ₹10,000 × 2.5% = ₹250

• Interest = ₹10,000 × (3.75% ÷ 30) × 10 = ₹125

• Total Cost = ₹375

Understanding the difference between credit limit and cash withdrawal limit helps you avoid unexpected charges and declined transactions.

Credit Limit

• The credit limit is the total amount you can spend using your credit card.

• It includes purchases, online payments, EMI conversions, and cash withdrawals.

• Example: If your credit limit is ₹1,00,000, you can spend up to this amount overall.

   

Cash Withdrawal Limit

• The cash withdrawal limit (also called cash advance limit) is the maximum cash you can withdraw from an ATM using your credit card.

• It is usually 20% to 40% of your total credit limit, depending on the card issuer.

• Example: If your credit limit is ₹1,00,000, your cash withdrawal limit may be ₹20,000 to ₹40,000.

   

Example

If your credit limit is ₹50,000 and your cash withdrawal limit is 30%:

• Total spending allowed = ₹50,000

• Maximum cash withdrawal = ₹15,000

Tip: Even though cash withdrawal is available, it’s best used only in emergencies due to higher charges.

When you withdraw cash using a credit card, the following charges usually apply:

• Cash Advance Fee: A fee is charged for withdrawing cash, typically around 2.5% to 3% 

• of the withdrawn amount, subject to a minimum amount (e.g., ₹300–₹500).

• Interest Charges: Interest starts immediately from the date of withdrawal. There is no interest-free period on cash advances.

• Higher Interest Rate: Cash withdrawals usually attract a higher interest rate compared to regular purchases.

• ATM Fee: Some banks or ATM operators may charge an additional fee for using their ATM.

• No Reward Points: Cash withdrawals generally do not earn cashback, rewards, or points.

• Cash Advance Limit: You can withdraw only up to a certain percentage of your total credit limit, as defined by the card issuer.

Tip: Cash withdrawals on credit cards should be used only in emergencies due to the higher costs involved

You can withdraw cash using your credit card with ease at an ATM. Here is how to get a cash advance using a credit card:

1. Find an ATM that allows you to withdraw cash using a credit card

2. Insert or swipe your credit card at the ATM

3. Select the option for ‘Cash advance’ or ‘Cash withdrawal’

4. Enter the amount you wish to withdraw

5. Confirm the transaction by entering your PIN and OTP to validate the transaction

6. After validation, the ATM will dispense the amount

7. Collect your cash and credit card from the machine

Advantages 

• Instant Access to Cash: Withdraw money quickly during emergencies.

• No Separate Loan Application: No paperwork or approval process required.

• Available 24/7: Cash can be withdrawn anytime from ATMs.

• Useful in Emergencies: Helpful when debit card balance is low.

• Flexible Repayment: Amount can be repaid along with your credit card bill.

   

Disadvantages 

• High Interest Rates: Interest starts immediately after withdrawal.

• Cash Advance Fee: Banks charge a fee for cash withdrawals.

• No Interest-Free Period: Unlike purchases, there is no grace period.

• No Rewards or Cashback: Cash withdrawals don’t earn benefits.

• Lower Cash Limit: Cash advance limit is usually lower than total credit limit.

• Can Increase Debt Quickly: High charges may make repayment difficult.

• Negative Impact on Credit Score: Frequent cash withdrawals may indicate credit stress.

   

Tip: Credit card cash withdrawal should only be used in urgent situations due to higher costs and immediate interest charges.

Here are the key reasons to avoid withdrawing cash using your credit card:

1. High Interest Rates 

Cash advances usually attract higher interest rates than regular credit card purchases, making them expensive to repay.

2. No Interest-Free Period 

Interest starts accumulating immediately from the day you withdraw cash. Unlike purchases, there is no grace period.

3. Cash Advance Fee 

Banks charge a transaction fee (often 2.5%–3% of the amount withdrawn), increasing your overall cost.

4. Additional ATM Charges 

Some ATMs may charge an extra fee for cash withdrawals, adding to your expenses.

5. No Rewards or Cashback 

Cash advances typically do not earn reward points, cashback, or other benefits.

6. Lower Cash Withdrawal Limit 

The cash advance limit is usually lower than your total credit limit, restricting how much you can withdraw.

7. Can Lead to Debt Trap 

High interest and fees can make repayment difficult, especially if not cleared quickly.

8. Negative Impact on Credit Profile 

Frequent cash withdrawals may signal financial stress to lenders and could affect future credit approvals.

Bottom Line: Credit card cash advances should be used only in emergencies and avoided for regular spending due to their high cost.