Why withdrawing money using a credit card, a bad idea?
Have you been tempted to withdraw cash at a bank or ATM with your credit card? If yes, then this article is for you, which focuses on, why cash withdrawal using a credit card is a bad idea.
Making withdrawals or withdrawing money with a credit card is nothing more than a cash advance. It is a cash loan against the limit of your credit card or a portion of it, with or without the use of an ATM. There is no approval required or credit history check. And you only need to have a limit for available cash advance, credit card and the password or PIN in case of ATM advances.
There may be situations where you are “short of effect” or without immediate availability in your bank account, so opting for a regular cash withdrawal at an ATM is not a viable option.
Withdrawing money with a credit card carries high commission and interest rate. And, if you use it too often is a signal to the issuing bank that you are continually in trouble with your personal finances.
The nominal interest rate associated with a credit card cash advance is around 25% to 26% per year. Additionally, you must pay an advance fee of 5% of the withdrawal amount or USD 10, whichever is higher.
How can you get money out of your credit card?
Your credit card issuing bank should give you a convenience checkbook for cash advances, so you only have the option to make cash advances with your credit card.
All you have to do is take the check with the required information and go to the nearest bank office in your area in order to cash it.
However, as explained above, any cash advance on your credit card will apply an additional charge to your card fees. In other words, a surcharge will be added that will reduce the amount of money you have available.
Now, there’s another way to get money out of a credit card, i.e.
If you choose to use the ATM to make advances, the first thing you should do is insert your credit card into an ATM. Following the on-screen prompts, enter your personal identification code (PIN) associated with your card.
If you do not have an advance PIN for your card, contact your credit card issuing bank to request one. Some banks allow the cardholder to request a PIN by phone or over the Internet, while others require the cardholder to fill out a form.
When the ATM accepts your PIN, follow the instructions to tell the machine how much money it should give you. Remember, you must be available to advance over a limit.
So before trying to get a cash advance using any of the above methods, you must make sure you have enough credit available in your account.
Most card issuers restrict the amount of cash advances and do not allow you to access your original line of credit.
So is it still a good idea to get cash out of your credit card?
Keep in mind that the charges and fees for making cash advances with your credit card are immediately applicable and do not have a short grace period like traditional credit card purchases.
In addition to the fees and commissions mentioned at the beginning of the article, if you get the cash advance at an ATM, you may also be charged a fee for ATM services that will be deducted from the amount of the advance.
Finally, you should also keep in mind that the cash advance interest rate is almost always higher than the rate charged on purchases. You should pay the advance as soon as possible to avoid excessive interest charges.