Smart things to know when using credit card to withdraw cash

1. Credit cards can be used to draw cash, but such withdrawals are treated as loans by the issuing bank. It is the costliest loan one can take and should be avoided.

2. Cash withdrawn using the credit card is charged the same interest rate as that applicable on credit card dues, 24% to 36% per annum or even more.

3. Interest on cash withdrawal with your credit card is subject to interest on a pro-rata basis. This means it kicks in from the date on which it is drawn.

4. There is no free interest rate period as in the case of spends charged to a credit card. Moreover, late payment charges will apply if only the minimum due is paid.

5. Cash withdrawal using a credit card also comes with administrative charges, which can be as high as 2.5% of the amount.

(Content courtesy: Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta)