Cash Withdrawal Interest Rate

meikj

Hi,

Recently I've gotten myself into a bit of a weird financial situation. My income has been cut off and I won't be receiving money for a few months. I literally have no money now. I need to borrow some money to keep me going until September when I start getting money again. I have a Capital One credit card with a credit limit of £500. To relieve my financial distress I was going to withdraw £400 in cash using it and deposit it into my bank account.

My theory was that I'd be able to afford the minimum payments for the 3 months using the £400 that I withdraw, as well as supply me with (hopefully) at least £300 to spend. In other words, £100 of the £400 will cover the minimum payments for 3 months. I will pay off the outstanding balance of the credit card at the end of September.

However, I read on the Capital One website that upon withdrawing cash you are charged interest daily. How much do they charge daily? If I take out £400 and they charge interest onto that daily won't my minimum payments be extortionate? But according to my credit agreement it says this:

Standard cash withdrawals rate: an effective rate of 34.94% p.a. (variable) from the date of debiting a transaction to your account until repayment.

How much will I need to pay per month if I withdraw £400 in cash right now?

Tixy

Interest is always charged based on the daily balance, it is added to the account monthly.

Interest would be around £12 a month - how much you would need to pay in minimum payments depends on what the terms of your card say about minimum repayments.

There will also be a cash withdrawal fee.

You might also want to check if your cash withdrawal limit is less than your actual limit (on some cards for some people it might only be 50% of the full limit).

meikj

Apparently there's a 3% charge on cash withdrawals. Also, I believe the minimum payment is 1% of the outstanding balance + interest. So effectively I'd be paying ~£16 a month?

Is this a daily limit? In other words, if there's a limit would I be able to take the rest out the next day? I can't seem to find anything in my credit agreement about a cash withdrawal limit.

bigadaj

Cash withdrawal on a credit card is one of eh most expensive forms of credit, far worse than a pay day loan assuming you don't default on the payday loan.

You need to find other solutions, sell some stuff, try and get some part time work etc. Using your credit card for food and other essential purchases will but you a few weeks at no cost.

Tixy

Yours might not have a cash withdrawal limit - those that do its not a daily limit but a permanent limit.

Does the T&Cs state the minimum payment is 1% plus interest?

meikj

Yes, in my credit agreement it states:

All monthly payments are due by the date stated in the statement, a date at least 26 days after the statement date. The monthly payment is the full outstanding balance if it is less than £5, but otherwise the greater of: • An amount equal to the total of (i) 1% of the outstanding balance on your account; (ii) interest applied to your account in that month; (iii) all Default Sums incurred in that month; and (iv) one twelfth of your Annual Fee, or
• £5
Any refunds that are applied to your account after your statement date will not affect the monthly payment due but will be reflected in your following monthly statement.

thenudeone

bigadaj wrote: »

Cash withdrawal on a credit card is one of eh most expensive forms of credit, far worse than a pay day loan assuming you don't default on the payday loan.

I dont agree at all.

To borrow £100 for 3 months on a credit card @ 34% APR will cost:

£3 cash advance fee
+
c. £2.90 per month = £8.70 interest (assuming a constant balance for simplicity)
= Total £11.70 (equivalent to 47% APR)

A wonga loan of £100 for just one month (the longest they will offer) will cost £36.72, at an APR of 4214% - that is not a misprint.

I picked the first non-sponsored payday loan link on google, their APR was 1737% for borrowing over 1 month.

So even a sub-prime card wins hands down over a payday loan.