What is Cash Advance on Credit Card?
A Credit Card can be a valuable tool for an individual in this cashless age. Instead of having to carry around bulk cash, users can simply use a good Credit Card as ‘plastic money’ to pay for various services. Not only that, banks today provide plenty of Credit Card benefits like cashback Credit Card offers, interest-free period, reward points and discounts. The bank sets a credit limit on the card, up to which the user may use it for his or her transactions, and then the user is required to pay the Credit Card bill on a monthly basis.
There are a variety of Credit Cards like instant approval Credit Cards, cashback cards, balance transfer cards and many more. All of these have different terms, different charges and they come with different Credit Card offers like Credit Card points, cashback, discounts, etc. Given below is a list of Credit Card types that you can choose from:
Types of Credit Cards:
Standard Credit Cards
This type of Credit Card is offered by most banks in India. They are simple Credit Cards with no bells and whistles. They come with revolving credit, low interest rates and generally are with no annual fee. As far as other benefits are concerned, a standard or a classic Credit Card comes with the usual cash advance option, worldwide usage and an interest-free period. If you’re the sort of person who doesn’t use a Credit Card much, but still would like to keep one for emergencies, then this type of Credit Card is a good option. They may not have the best Credit Card offers, but they’re reliable.
Travel Credit Cards
A travel Credit Card is a type of Credit Card that has many benefits for a constantly travelling person. The benefits include air miles on purchase of flight tickets. These air miles, once accumulated, can be used to purchase tickets. Such cards also offer plenty of discount options while buying both domestic as well as international tickets.
Cashback Credit Cards
A cashback or money back Credit Card is quite useful if you use a Credit Card frequently for online purchases and utility bills. These Credit Cards offer a percentage of the purchase value back to the customer as cash rewards. The cashback percentage can be anything from 5% to 20%. It can be availed for restaurant bills, Uber costs and various online transactions.
Fuel Credit Cards
If you’re a person who commutes long distances by car for your business or other purposes, then a fuel type of Credit Card may be quite useful for you. A fuel Credit Card offers great discounts on fuel pumps when you’re refuelling your petrol or diesel car. Constant travellers can save some money with such a type of Credit Card. Other benefits include a fuel surcharge waiver and Credit Card reward points for fuel transactions.
Thus, there are a lot of options as far as Credit Cards are concerned and it is important to compare cards and then you can choose whatever you feel will be beneficial to you.
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Sometimes you just need access to quick cash to handle an emergency situation. Dipping into your savings may seem like the only way to cope with this situation, but it isn’t true. If you have a credit card, you can conveniently take a cash advance to tide over the emergency. But before you reach out for your credit card, know the following things about cash advances.
What exactly is a cash advance on credit cards?
A cash advance on a credit card is a way to get the money right away by making a withdrawal using the credit card. There are three ways to make cash advances on credit cards – at ATMs, bank branches, and online banking.
Such cash advances come with a limit, and the banks mention the exact amount that you are allowed to withdraw as the cash advance in the credit card statement. Usually, this amount is equal to or lower than the credit limit on the card. Cash advances are made through ATMs in the same way as cash withdrawals are made using debit cards. You will have to pay credit card cash withdrawal charges.
Things to remember when you withdraw money from a credit card
Though a cash advance is not a good decision financially, it becomes the last resort in some cases. So, if you have to make a cash advance, keep the following points in mind:
1. Understand payment allocation
If you are just making minimum payments on the credit card for a specific billing cycle and you have taken a cash advance, the payment goes towards the outstanding balance instead of the cash advance.
Cash advances carry a finance charge of 2.95% per month (APR 41.75% p.a.) from the date of withdrawal until the date of full payment. In case you don’t pay the cash advance amount on time, it gets carried forward in the next billing cycle, and you will end up paying a higher credit card interest rate. Hence, it is best to pay the minimum balance and the cash advance amount to avoid such situations.
2. Pay your cash advances off immediately
Your ICICI Bank credit card comes with so many lucrative offers. For instance, with the Platinum Credit Card, you get a 1% fuel surcharge waiver at all HPCL petrol pumps, reward points, and dining offers. Why would you risk it all by not paying your cash advances?
Cash advances do not have any grace or interest-free period. So, the interest will keep on accumulating at the present credit card interest rate. It is better to pay off the advance to enjoy the benefits in peace.
3. Know about the rules and regulations
A bank has its own rules and regulations in terms of cash advances and related interest rates. It is advisable to go through the rules and regulations for your particular credit card on the bank’s site or in the material sent to you with the card.
And now you know what a cash advance is and how not to let it increase your credit card bills. So, do not hesitate to take a cash advance on your credit card the next time you really need it. Just remember to pay it back responsibly!
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