Most working people in India use credit cards. The reward points, cashback, and discounts received during shopping are the biggest reasons for its popularity. But when it comes to withdrawing cash from a credit card, it can prove to be a very expensive deal. It has heavy charges, interest, late fees, and a bad effect on the credit score. Know why experts advise never to withdraw cash from a credit card.
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Increasing the habit of using a credit card
Today, crores of people in India use credit cards. Especially working people give it priority in online shopping, bill payment, and travel booking. However, most people keep using it continuously even after knowing that shopping with a credit card is a kind of loan. The biggest reason for this is attractive offers and a reward system.
Heavy charge for withdrawing cash
If a person withdraws cash from an ATM using a credit card, then a charge starts being levied on it immediately. Usually, this charge is from two and a half to three percent. For example, if someone withdraws Rs 10,000, he may have to pay Rs 250 to 300 extra from the beginning. The special thing is that this charge starts counting from the first day of withdrawing money.
ATM transaction charge burden
Not only the charge but also the ATM transaction fee has to be paid on cash withdrawal. Some transactions are free from the banks, but an additional charge is deducted every time the limit is exceeded. This further increases the financial burden on the cardholder.
Penalty for late payment
If a person does not pay on time or makes a partial payment, then he has to pay a late payment charge. This fee can be about 15 to 30 percent of the withdrawn amount. That is, even a little negligence can increase your bill manifold.
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Direct impact on credit score
The biggest disadvantage of withdrawing cash from a credit card is to the credit score. Usually, only 40 percent of the card limit can be withdrawn. But doing so increases your Credit Utilization Ratio, which causes your CIBIL score to drop. Apart from this, if the payment is not made on time, it can also harm your future loan eligibility.