Cash Advance from Credit Card. What are the charges you will have to pay?

Do you know you can draw cash from any ATM using your credit card? Or are you thinking to do it now? Or you have done it already and have been charged with a fee & service charges.

Well anyways, you should know what charges are coming before you do something. Here is the simple detail about the Cash Advance fee & charges applied when you draw cash from your credit card.

When you draw cash from your credit card, you are charged with a cash advance fee and service charges according to Annual Percentage Rate (APR) for Cash Withdrawals. The cash advance fee is either a fixed amount or fixed percentage of the transaction amount, whichever is higher. Normally it is Rs. 1,000 or 3.5% of transaction amount. While the service charges vary according to cash transaction amount & number of days until you make full payment from the date of transaction.

For example, you have drawn cash Rs 10,000 from ATM on 5^th Jan and you pay it completely on 20^th Jan. This makes number of days 15 between your transaction date (5^th Jan) and full payment date (20^th Jan). Lets assume that the cash advance fee is Rs. 1,000 or 3.5% whichever is higher. In this case it will be Rs 1,000 as it is higher than 3.5% of the transaction amount which is Rs 350. We assume that APR for cash transaction is 40%, then the service charges will be as follow:

Service charges for Rs 10,000 = 10,000 x 40% x 15 / 365 = 164.38

So your total charges for this transaction will be Rs. 1000 plus Rs. 164, which make total of Rs 1164 for withdrawing cash of Rs. 10,000 for 15 days.

The above charges were calculated for 15 days, you should also calculate that what service charges on daily basis. In that way you can make a better decision on when to pay. For that you simply use 1 instead of 15 or just multiply APR with transaction amount (Rs 10,000) and divide by 365.

Service charges for Rs 10,000 = 10,000 x 40% / 365 = 11

So you should know that you will be charged for Rs. 11 for every day until you make full payment. Looks like only fee is high, you might want to take chance with service charges!

Now these charges surely depend on two things, the transaction amount & number of days till payment. So you should calculate well before making any transaction and see if the charges you have to pay are reasonable according to your needs.

To know about the Cash Advance Fees & APR for Cash Transaction Rates offered by various banks for Cash Advances, CLICK HERE. You should also note that you might also be charged with any ATM charges and other charges by the bank whose ATM machine you have used for cash withdrawal. It normally happens when you draw cash from any bank other than your credit card bank. Like if you are using an Bank Alfalah Card & draw cash from Standard Chartered ATM; then you will be charged surely for ATM charges and any other charges, if applicable, by Standard Chartered.