What is a cash advance on a credit card and how does it work?

A cash advance on a credit card allows you to withdraw cash from your credit card's available credit limit. It provides you with access to instant cash, similar to a shortterm loan. Here's how it works in India:

1. Cash Withdrawal: You can withdraw cash from an ATM using your credit card. Insert your card into the ATM, enter your PIN (Personal Identification Number), and choose the cash withdrawal option. Specify the amount you want to withdraw, keeping in mind any withdrawal limits set by your credit card issuer.

2. Cash Advance Fee: When you make a cash advance, your credit card issuer typically charges a cash advance fee, which is usually a percentage of the amount withdrawn or a flat fee, whichever is higher. This fee is in addition to any applicable interest charges.

3. Interest Charges: Unlike regular credit card transactions, cash advances often accrue interest from the day of the withdrawal. The interest rate for cash advances is generally higher than the interest rate for purchases. Interest is charged on the cash advance amount until it is fully repaid.

4. Credit Limit Utilization: The cash advance amount reduces your available credit limit on the credit card. For example, if you have a credit limit of ₹50,000 and withdraw ₹10,000 as a cash advance, your available credit limit for purchases will be reduced to ₹40,000.

5. Repayment: Cash advances should be repaid in a timely manner to avoid accumulating highinterest charges. Minimum monthly payments usually apply to cash advances as well, but paying only the minimum may result in carrying a balance and incurring interest charges.

6. Eligibility and Limits: The availability of cash advances and the maximum amount you can withdraw may vary based on your credit card issuer and your individual credit limit. Not all credit cards may offer the cash advance feature, so it's important to check with your card issuer.

It's worth noting that cash advances should generally be used as a last resort due to the higher costs involved. It's advisable to explore other alternatives, such as personal loans or emergency funds, before resorting to cash advances on your credit card.