When you need money, you can depend on the credit card to bail you out. A credit card in your pocket gives you a wonderful sense of security. You can rely on it every time. You have facilities like using the card for offline and online purchases. You can also use the Cash Advance facility to withdraw cash from ATMs. Some of them come free of cost whereas some like the Cash Advance facility comes at a substantial cost. There are various methods in which you can avoid these costs. One such way to use money in your credit card is when you do a credit card to bank account transfer.
Let us see five benefits of transferring money from your credit card to your bank account.
Use funds in an emergency
An emergency can come to any person at any time. You might not have enough money in your savings account. Your home loan instalment might be due. Of course, no one likes to default on his/her payments. Having a credit card can help under such circumstances. You can request your bank to provide you with a demand draft as a Cash Advance. Deposit this draft in your bank account to ensure the clearance of the home loan instalment. You can opt to withdraw money from an ATM and use it to repay your home loan instalment.
Save on the interest component
When you use the Cash Advance facility, you have to pay interest on the same @ APR from the time you withdraw to the day to repay the amount to the bank. It is like a high-interest personal loan. However, you can save on the interest component by transferring the amount from your credit card to your bank account using different e-wallet apps. Banks consider such transactions as regular transactions and do not charge interest on the same as they do so with Cash Advance transactions. In this way, you withdraw money and save on the interest as well.
Save on other charges
Besides interest, banks charge Cash Advance fee that can be up to 2.5 to 3% with a minimum of Rs 500 on every occasion you utilise the facility. Thus, if you were to withdraw a small amount, say Rs 2,000, you will incur a cash advance fee of Rs 500. Apart from the cash advance fee, you have to repay the loan with interest @ APR. Hence, you end up paying Rs 2560 at the end of the month. It amounts to repaying more than 25% of the borrowed amount in one month. Please transfer the amount to your bank account using the various e-wallet apps available on the internet. You end up saving a substantial amount.
Avail the benefits of an interest-free period
The Cash Advance facility is a typical one. You get money, but you pay a substantial cost for it. Every such withdrawal attracts a cash advance fee. Secondly, you pay interest on the cash advance for the period it remains outstanding in the books. Thirdly, you have to clear the amount with the next bill because banks add this amount to the minimum amount due while preparing the credit card statement. You can save all the trouble if you transfer the required amount from your credit card to your bank account online. You continue to enjoy the interest-free period on the amount you have moved to your bank account. It also helps if you decide to pay the minimum due amount. You need not repay the entire transferred amount, as you would have done in the case of a Cash Advance.
Use the money at places that do not accept credit cards
You might find yourself in an area that does not accept credit cards. The balance in the credit card account can come handy under such circumstances, as you can transfer it to your savings bank account and withdraw cash from the ATM using your debit card. Sometimes, you find retailers preferring to receive money in their e-wallets instead of swiping your credit cards. The reason is that banks charge a commission at a pre-decided rate when they enter into a merchant establishment agreement with the retailer. The retailer cannot pass on the commission to the customer. Hence, they suffer a loss. Accepting payments through e-wallets does not entail paying as much commission as they would pay for accepting credit cards. Secondly, they can recycle the funds available in their e-wallets with their suppliers without incurring any charges. Under such circumstances, they might refuse to accept your credit cards. Transferring the amount to your e-wallets or bank account can be handy.
We have seen five advantages of transferring money from credit card to your bank account. However, one should remember not to use such methods frequently. One of the prime reasons is that the IT authorities keep track of all credit card accounts where the annual spending is more than Rs two lakhs. In trying to save some amount of interest, it is not advisable to come under the scanner of the IT authorities.