All credit cards, including those issued in the United Arab Emirates, come with a credit limit, which is the maximum amount that can be made use of by the cardholder.
In addition to paying bills and making purchases, credit cards can also be used by the cardholder to withdraw physical money.
This facility of credit cards is referred to as a cash advance.
Credit cards can be used in a similar manner as other cards issued by banks to withdraw money from ATMs.
This cash withdrawal facility is classified as an additional feature on credit cards, the primary purpose of which is for making transactions.
The great majority of credit cards that are issued in the UAE today will include a cash advance or cash withdrawal feature.
All credit cards are issued with a credit limit, and cash can be withdrawn by the cardholder according to that limit, which will vary depending on the bank or credit card provider.
Some banks in the UAE even make the maximum cash withdrawal limit as much as 100%, allowing the cardholder to withdraw all of the credit card’s available credit limit in the form of cash.
The withdrawn amount must be repaid by the cardholder prior to the due date, which is listed on the credit card billing statement.
There are a number of charges such as cash advance rates and cash advance fees associated with the cash advance facility on credit cards – these will also need to be paid together with the amount of money that was withdrawn.
A credit card transaction bill is normally generated once every month in the UAE.
Once the bill has been generated, users are given a maximum grace period of up to 21 days – this is generally seen as the due date on which the outstanding credit card bill has to be paid either in full or at least the minimum amount.
If a cardholder fails to pay by the due date, interest will start to accumulate on the debt.
When the credit card is used to withdraw cash by the cardholder, the interest rate on the cash advance will apply from that day without a grace period.
Some banks in the UAE may also include a cash advance processing fee as well as the interest rate.
The majority of UAE banks charge cash advance interest rates and fees of around 3% for both.
The interest rate is levied on a monthly basis, while the cash advance processing fee is only applied once.
Although cardholders can use a credit card’s cash withdrawal facility to get cash immediately without the need for approval or documentation, there are a number of disadvantages to doing so.
These disadvantages include high cash withdrawal fees, the user’s credit score being potentially negatively impacted, and immediate high interest rates.
Using a credit card to withdraw cash is therefore not always a good idea, with other financial options such as personal loans to take into consideration, and should be used only in cases of emergency.