Ask any independent financial expert whether it is sensible to withdraw cash using a credit card and you will receive two replies. The conventional one is ‘no, you should never use your credit card to withdraw cash.’ The other reply is ‘it depends on which card you use.’
Usually, withdrawing cash using credit cards is not recommended. The fact that you need to pay a high interest rate on any withdrawals makes it a bad idea. However, there are some of the best credit cards which come with features beneficial for ATM cash withdrawals.
With both these options available, let’s check out the advantages and disadvantages of this financial habit.
Withdrawing cash via credit cards: pros and cons
Any honest review must deal with the disadvantages first. They are:
Interest rates that financial institutions charge on cashless transactions is often charged different from cash transactions like withdrawing money from ATMs. This makes interest calculation a little complicated.
Whenever you use a card to withdraw cash, remember that you are essentially ‘borrowing’ from your lender. It is true that such cards offer attractive features like reward points. But it is recommended that you should always treat such reward points as secondary. The most important thing is you need to repay the money.
If you ever default on paying back, your credit score will see a negative impact. Since withdrawing cash is expensive given how much you have to repay, it is advisable that you make no such ATM transactions. Make sure that whenever you apply for credit card, you read the terms and conditions carefully so that you do not make any financial mistake.
Advantages of withdrawing cash using a credit card
Sometimes, withdrawing cash becomes essential though. Therein lays the inborn advantage of using the best credit card to withdraw money from an ATM. The major advantages are:
Helpful in financial emergencies: In a country as wide and varied as India, financial habits are very different even across districts of the same state. Often, people prefer cash as it is easier to use and process. Certain organisations are still averse to using electronic payment methods. Thus, in times when you need instant cash, a credit card withdrawal is your only hope.
Longer interest-free period: When you use some chosen cards to make cash transactions in ATMs, only a flat processing fee of 2.5% applies. You don’t have to pay any interest for up to 50 days. This makes paying back any outstanding amount easier.
Bajaj Finserv RBL Bank SuperCard is one-of-a-kind card that packs the powers of 4 cards in 1 adding value to your life. It also comes with interest-free ATM withdrawals along with other industry-first features.
What should you do?
Now that you know both the advantages and disadvantages of withdrawing cash using a credit card, make sure that:
You only withdraw cash when it is absolutely necessary.
Spend wisely and save regularly. Emergencies are a different thing but if you have to withdraw money frequently, you need to bring a degree of financial caution to your daily habits.
Note that there are multiple payment gateways nowadays. Use online payment options as much as possible even when the establishment you are purchasing from does not have a swipe machine where your credit card can be used.
Finally, always settle your outstanding debts on time to avoid a negative credit report. Negative reports can lead to rejection of loans and other financial instruments in future. But if you pay everything on time, you are in the clear.
Always look for the ‘HTTPS’ sign on the website where you make payments using any card. This ensures that your payments are safe.
Follow what your instincts and the points above say, and you will always get the greatest service from the best credit card.
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