Personal Loan or Cash Withdrawal on Credit Card

What is cheaper, personal loan or cash withdrawal on credit card?

Withdrawing cash using a credit card can turn out to be very costly if you do not repay it quickly. Interest rates on credit card cash withdrawals can range from 20% – 40% on an annual basis depending on the type of card you use.

For most credit cards, the interest rate on cash withdrawals and credit outstanding for purchases made is the same. But here is the kicker – for the purchases you make through your card you get an interest-free period to pay back. Cash withdrawals on your card have no such benefits; interest is charged from the moment you withdraw the cash. And do not forget the transaction charge – this is a charge levied on the withdrawal at the ATM.

Therefore, unless you are in a very real emergency where you need instant cash, it is advisable to not withdraw cash on your credit card. Remember you also have to repay it as early as possible to avoid prohibitive interest payments. If you have the requisite time, it is always better to go for a personal loan. It is the fastest of all retail loan products and the interest rates are a lot, lot lesser than those on credit card cash withdrawals.


Personal loan

  • Long application process
  • Lower interest rate than credit card cash withdrawal.
  • Average rate of interest is around 12 – 22 per cent

Credit card cash withdrawal

  • Easy access during emergency
  • Apart from the higher interest rate, you will also have to pay a one-time transaction charge.
  • Average rate of interest is around 20 – 40 per cent



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