If you use a credit card in India and occasionally withdraw cash from an ATM, this habit can prove to be costly for you. This is called a cash advance and even though it fulfills your need for money immediately, the charges and interest rates associated with it can shake your budget.

A credit card is a type of loan, which is available from a bank or a financial company. Therefore, it is very important to use it wisely and responsibly, so that your credit score remains good and the burden of debt does not increase.

What is a cash advance fee?

When you withdraw cash from your credit card through an ATM, the bank charges a cash advance fee. This fee is usually a percentage of the amount withdrawn or a fixed amount, whichever is higher. For example, HDFC Bank charges 2.5 percent or Rs 500 (whichever is higher). Kotak Mahindra Bank charges Rs 300 for withdrawing Rs 10,000 cash, but this also does not exceed a maximum of 2.5 percent or Rs 500.

More hidden expensesThis is just the beginning. After this, you also have to pay interest. That too without any grace period. That is, as soon as you withdraw money, interest will start accruing and this interest rate is much higher than normal purchases.

5 important things that every user should know-

Interest starts immediately: Interest starts accruing as soon as cash is withdrawn.

No reward points: You do not get any points or benefits on withdrawing cash.

Effect on credit score: Frequent cash withdrawals show that your financial planning is weak, due to which it may be difficult to get a loan or credit in the future.Better options are available: If needed, options like personal loans or bank overdrafts are cheap and beneficial.Charges are very high: Combined with processing fees and interest, it turns out to be an expensive deal.

Disclaimer: This content has been sourced and edited from News 18 hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.Disclaimer: This content has been sourced and edited from News 18 hindi. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.