723749 SIP myths you must know!
All banks generally charge up to 4% monthly interest on credit card cash transactions.
Almost all of us have single or multiple credit cards in our wallets. A credit card gives you lots of benefits including purchase on credit and an interest-free period of 45 to 50 days, EMI facility on transactions, up to 4X reward points. One can withdraw cash from ATMs with the help of a credit card. But for that cash transaction, high interest is charged and, therefore, credit card holders generally avoid this usage.
But IDFC First has become the first bank to announce interest-free cash transactions within a billing cycle. It will charge only a nominal amount on whatever the withdrawal amount would be. No other public or private sector bank offers this facility. Though RBL Bank had announced it, they have withdrawn it after running it for a brief period.
The benefit
The private sector lender offers interest-free cash advance for 48 days to all credit card customers. The bank is testing the offer, said B Madhivanan, chief operating officer, IDFC First Bank.
Banks typically charge Rs 250-450 for every cash withdrawal on credit cards, along with an interest of 2.5-4% per month, applicable from the day of withdrawal till the full amount is repaid. Interest is also levied on non-cash spends, but customers enjoy an interest-free period unlike cash transactions.
IDFC First charges only Rs 250 as processing fees for any amount of withdrawal. “It is an experiment and is not our primary feature. We will see how it plays out and, accordingly, look at it,” said the bank’s COO.
What others offer
All public sector banks and private lenders offer cash withdrawal facilities to credit card holders but the amount depends upon the credit limit and multiple factors of the cardholder.
When a person withdraws any amount, an interest rate of 3%-4% is charged from that very day onwards along with a processing fee between Rs 250 and Rs 450.
Until you pay up the full amount withdrawn you have to pay the interest rate. For example, if you withdraw Rs 10,000, you have to pay back at least Rs 13,400. If you go for part payment, then you have to pay more.
But IDFC First does not charge any interest if the amount withdrawn is paid back within the same bill cycle.
Not so popular
Very few people withdraw cash with the help of credit cards due to this high rate of interest. According to RBI data in the month of June 2021 customers withdrew just Rs 218.7 crore from ATMs using a credit card, while swiping for Rs 62,745 crore on point-of-sale terminals. India has only 6.3 crore credit card users till June 2021.