India had around 56 million active credit cards as of January 2020, a mere 6.7% (approx.) of total debit cards in circulation. Even though credit cards can act as an alternative to debit cards to some extent, the former cannot replace the latter completely.
Moreover, while credit cards are optional, account holders will need debit cards to withdraw funds.
However, individuals can perform a credit card to bank transfer to avail liquid cash and address emergency financial situations.
How to transfer cash from credit card to an account?
I.) Via mobile wallets
The most popular way to transfer cash from a credit card to account is through a mobile wallet. Individuals can either use the official app or website of the wallet to make the transfer.
During FY 2019 and 2023, the Indian mobile wallet market is expected to grow at a CAGR of more than 52%.
It should be noted here that a direct transfer is not possible as of yet. Cardholders will first have to recharge their wallet with the credit and then make the transfer.
II.) Via the credit card provider
Some credit card companies and financial institutions offer the facility of transferring cash directly from the cash to an account. Customers can call their credit card customer care number to know if they can avail of such a facility.
Things to keep in mind before transferring
Before transferring, it is advisable to keep the following points in mind –
a.) A transaction fee may be charged
Cardholders may have to pay a transaction fee to the mobile wallet service provider when transferring cash from their credit card to an account.
b.) Individuals can incur a cash advance fee
Many a time, such transfers are considered as a cash advance as funds are being withdrawn. In such situations, credit card companies will levy a cash advance fee.
The charge is usually 2.5% + GST or Rs.100 + GST, whichever is higher; the fee generally differs from financial institutions.
c.) Credit card providers will charge interest
Other than transaction fees and cash advance fees, individuals may also incur high interest when performing a credit card to bank transfer since it is considered as a cash advance and not a general transaction.
d.) The card holder’s credit score can fall
Such transfers can increase the credit utilization ratio of a cardholder. A ratio of more than 30% of the available credit limit can cause that individual’s credit score to fall.
Credit-consciousness among self-monitoring Indian millennials increased by 58% between 2016 and 2018 as per a report by TransUnion CIBIL.
Hence, it is advisable to manage a credit card responsibly as it can improve one’s credit score.
Above all, failure to pay the cash advance back will lead to high late payment fees and a drop in the card holder’s credit score.
What the alternatives to cash transfer from a credit card?
# ATM cash withdrawal
There are few credit cards that do not charge hefty fees and interests on cash advance from ATMs. For instance, the Bajaj Finserv RBL Bank SuperCard offers cash withdrawal facility via ATMs without charging any interest, for up to 50 days. Cardholders only have to pay a flat processing fee for the same.
# Personal loan against credit card limit
Some credit cards also provide the facility of emergency personal loans against the available credit limit. These loans only incur a minimum processing fee and usually do not attract any interest for up to 90 days.
To conclude, even though individuals can make a credit card to a bank transfer, it is highly advisable not to do so. There are several other ways to use a credit card and do more with it.