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Using credit cards at bank ATMs? Here is what you should know

Credit cards have become an important part of salaried employees' life. The more it helps you in time of financial distress, it also comes as a nightmare during dues payment. It would not be wrong to say that, many of us have faced the conundrum of credit cards. 

According to RBI data, the number of outstanding credit cards as
at the end of July stood at 40153868. Among these, a total of 804,212 transactions were made using credit cards at ATM amounting to Rs 3,723 million. 

One thing is clear that customers are using credit cards in heavy amount at ATMs. Why making a cash withdrawal using credit cards is risky, is because of its interest rates and fees levied on performing such transactions.

This one should be taken very seriously. Always remember not to make cash withdrawal using credit cards, if you want cash then debit cards are what you should use. 

It needs to be noted that cash withdrawals made on credit cards are charged interest from the day of withdrawal. Not only this, some credit cards charge an additional interest for cash withdrawals.

Let's compare SBI vs HDFC Bank vs ICICI Bank charges for credit card usage at ATM.

HDFC Bank! 

A transaction fee of 2.5% (Minimum Rs 500) (excluding Infinia) would be levied on
the amount withdrawn and would be billed to the Cardmember in the next statement. The
transaction fee is subject to change at the discretion of HDFC Bank.

All cash advances also carry a finance charge equal to charges on revolving credit (please refer schedule of charges) from the date of withdrawal until the date of full payment. The finance charge is subject to change at the discretion of HDFC Bank. 

SBI! 

A transaction fee would be levied on all such withdrawals and would be billed to the Cardholder in the next statement. A transaction fee of 2.5% or Rs. 300 whichever is higher at domestic ATMs and 3% or Rs. 300, whichever is higher at international ATMs will be levied.

The transaction fee is subject to change at the discretion of SBI Cards & Payment Services Private Limited (SBICPSL). All cash advances also carry a finance charge equal to charges on revolving credit (please refer schedule of charges) from the date of withdrawal until the date of full payment.

ICICI Bank! 

A transaction fee of 2.5% (Minimum ` 250 for eBOR and ICICI Bank ATMs, Rs 350 for other ATMs) would be levied on the amount withdrawn and would be billed to the Card member in the next statement. The transaction fee is subject to change at the discretion of "the Bank". 

All cash advances also carry a finance charge of 2.95% per month (APR 41.75% per annum) from the date of withdrawal until the date of full payment. The finance charge is subject to change at the discretion of "the Bank". 

Let's understand how will you be trapped in the game of cash advances.

Let’s suppose you withdraw cash of Rs 10,000 from an ATM on June 29, 2018, then your bill generation date of this card would on 1st of every month. An immediate transaction fee of Rs 300 would be deducted along with service tax, in this case, let’s take 15% which would be Rs 38. 

First possibility: 

The moment you make a cash withdrawal, an interest rate of 3.40% will be levied which is about Rs 340 on your amount Rs 10,000. If you paid the amount before deadline July 23, 2018, then you only attract an interest rate of Rs 395, transaction charge of Rs 300 and service tax of Rs 38 on your withdrawal amount. This would be about Rs 10,678. 

Second possibility: 

If you pay the amount on the same day on June 29, then only cash handling fees ranging from Rs 250-700 will be applied. No interest charge is applicable. 

Third possibility: 

In case, you failed to clear the payment before the first billing cycle July 23, then 3.40% basic interest, along with compound interest penalty will be levied in the subsequent bill amount till the time final payment is received. 

Generally, banks preset the withdrawal amount from an ATM using a credit card. Most of the bank cap it between 30% to 40% of the card limit. 

Just in case, if there is an emergency and no other option is left but to withdraw cash from credit cards, then always make sure to clear the debt amount as soon as possible. As interest rate will be charged on a daily basis, however, by making balance payment soon, the interest rate charged on balance outstanding will get lowered. 

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