With the many benefits of credit cards, they are a life saviour that come to your rescue at the last minute and offer you financial help. A credit card will make life easy in many ways, from getting reward points to discounts to buying now and paying later.
But have you ever reflected on the other aspects of being a credit card holder? Elements include paying credit card bills from another card, how credit card cash withdrawals impact your credit score, etc. If you still need to, then you, by all means, are on the right page. So let’s get started.
Credit card Withdrawals and Their Charges
Credit card withdrawal is a simple process where you withdraw cash through your credit card from an ATM. Apply for a credit card, receive a credit card, set the limit, go to an ATM, and withdraw cash.
However, before you overindulge, you must know the credit card withdrawal charges. Even though one bank’s credit card withdrawal charges are sure to differ from that of another, the percentage mainly varies between 2.5% to 5% of the transaction amount. As a user, it is also vital that you are aware of the fact that these charges are applicable every time cash is withdrawn.
Impact of Credit Card Cash Withdrawals on the Credit Score
Did you know there are many ways your credit score gets affected when you withdraw cash? If not, then the following points will help you draw a clear picture.
- Credit utilisation technique – Utilisation of credit is the ratio of your credit use to your credit card limit. Withdrawals done using your credit card result in your credit utilisation shooting up, which could lower your credit score.
- Late payments – In cases where the cash had been withdrawn with the credit card, the payments must be made on time. Late payments can significantly impact the credit card score.
A low credit score is sure to have adverse effects. In cases where you fail to make payments on time, there is a high-interest rate on the amount withdrawn. It increases the overall financial burden and makes it harder to manage existing debts. Moreover, with a low credit score, getting a desirable amount of credit in the future becomes challenging as lenders perceive higher risks in lending to individuals with such scores. It can impact your ability to secure loans for significant life investments like buying a home or starting a business, potentially limiting future opportunities for financial growth and stability.
There is no denying that with the many advantages credit card offers, it is sure to be a lifesaver. What makes withdrawals from ATMs through credit cards an easy task is that there is no documentation needed, one can withdraw up to 20 % – 40% of their credit card limit, and it is a quick and easy process.
However, you need to be aware of not just the pros and the cons. With negatives, including a low credit score, high rate of interest, etc, you can come across potential challenges. As long as you make payments on time and maintain good credit scores, you have nothing to worry about. Be a competent user and make the most of your credit card cash withdrawals without compromising your credit scores.