You could end up paying not just a steep rate of interest but a hefty cash advance fee as well. In several cases the cost of the loans exceeds 36% on an annualised basis
Rahul, 24, landed himself a new job in Delhi at a multinational company. He had just shifted to the new city from Mumbai, but was soon soon hit a cash crunch brought about by a variety of reasons.
The money he got from his parents was exhausted, pay day was still very far away and, to make matters worse, his landlord began pestering him for some more money for the house he’d already paid advance rent and deposit.
All this meant that he needed some quick cash that he was finding really difficult to raise. So he decided to use his new credit card to sort out everything. Just go to the ATM, insert your card, punch in the PIN number and amount and bingo! You get the money you want so badly.
It was only a few weeks later that he realised that easy liquidity comes with some unpleasant side effects. When Rahul received his monthly credit card bill, he was shocked to see the charges — interest and processing fee — that the card issuer had bunged him with.
Here are some of the charges such loans attract:
Cash advance fee: This fee is charged every time a credit card is used to withdraw cash and typically varies from 2.5% to 3% of the withdrawn amount, subject to a minimum amount of Rs 300 to Rs 500.
Finance charges:
You will also have to pay a finance charge on cash advance fee at a rate similar to that charged on the withdrawn amount. It will be levied from the date of withdrawal till the amount is paid back in full.
Interest:
This is charged at the monthly percentage rate and will be levied from the date of transaction till the repayment is made in full.
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