Parking credit card funds in a bank account

Hello, recently I thought about an interesting possibility, which is parking funds from your unused credit cards into a bank account for various reasons.

Are there any potential disadvantages or even risks associated with this practice? One could simply repay the amount before an interest could be charged by the credit card, and then again withdraw it after a few days.

The only problem I can think of is the high credit utilization rate which may impact the credit score. Has anybody tried this yet? If so please share your experience.

If it was possible everyone would be doing it.

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Cash limit on a credit card is usually much lower than credit limit. There is upfront min charge debited for taking cash from a card. Interest is charged on cash without any waiting period. Also there is no real way to do a online digital payment from credit card to your bank account. So this is not a solution to fill your wallet unless ofcourse you have any emergency hard cash requirements.

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My thoughts exactly.

True, I forgot to mention that.

Some banks waive that fee, and sometimes the benefits can also out-weight the nominal Rs. ~100 fee.

Really? Then what’s the benefit of using cash from credit cards? Is it only useful for emergencies?

Withdrawing Cash from credit card is much more expensive than you think, as there is an upfront fee and Interest charging starts the day you withdraw Cash (there is no interest free period for it) . So it will always be loss making practice.

Earlier, there was a hack where you can use credit card to load money in your digital wallet (like paytm) and transfer money from wallet to bank account. This worked for sometime, but wallet companies got whiff of this and have closed this loophole now.

So i don’t this this is practical

Withdraw cash from credit card and deposit it in the bank?

I remember in the early days of Paytm, people used to load their wallet using their credit cards and withdraw the funds to their bank accounts. When they realized people were misusing this facility, they stopped it and allowed withdrawal only back to the source of funds.

I can think of another “hack”, CRED allows one to pay rent via their credit card, the way their system works is that you provide the IFSC and Acct. No. of the landlord, there’s a convenience fee of Rs. ~130 but aside from that I don’t think there is any other fee.

You could in theory pay rent to your own family member or even yourself.

Also, rent up to 60,000 per year is tax deductible if you don’t get HRA as part of your employment.

Pretty sure that’s illegal, unless you really are paying rent to the landlord directly. You cannot claim this benefit if you have a family residence in the same city.

Yes a short term hack, because it is introductory offer, I am sure convenience fee will increase after 1-2 months. Other platforms have convenience fee of around 2%.

Also you will have to provide PAN of your landlord. You never know how this gets reported and IT department might consider this as income in receivers name, resulting in tax liability.

So really not worth it for earning minuscule interest on credit free period.


To meet emergency hard cash requirements.

With cash advance from credit card there is no credit holiday like the way you do when u do purchases. This is because

  1. When u make cash advance the bank will be out of pocket and your interest rate on advance start charging from the date u take the money. No free holiday period.
  2. The interest rate charged is on a per month basis so dont get fooled that u are getting interest rate of 2 percent per month as an example
  3. For certain cards if u dont pay 100 percent on due date, apart from the entire amount which will be charged both purchases and cash advance even future purchases will be charged. Hence before u take out money in a absolute emergency check with the credit card issuing bank the details

It is NOT a good idea at all to take cash advance from credit card instead take a personal loan in case of need

When credit card dues spiral and get uncontrolled one of the options is to convert all the dues into a personal loan and cancel the card. This is because lower interest rate on personal loan and tenor of personal is higher so emi will be lower. As interest rates are as high as 24 percent pa

So be very careful. There are sales agents who offer cash advance against credit card amount saying there will be no processing fee etc. The rate quoted will be on a per month basis so dont fall for it

As they say there is always a loophole in everything. If you own a business and have a pos machine then u can swipe on this machine as a purchases, cash comes to ur business account. This will get u free credit period but note 2.65 percent or what ever commission the the credit card co will charge you will loose on the transaction. This practice is not recommended at all.
Still remember when credit card was introduced jewellers and electronic shops used to top up the bill will commission percent if u offered credit card during those days as margin was low for these business

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Credit card advances should only be used as a last resort and for emergencies only. Nowadays since all service providers like hospitals pharmacy airline office provide pos the need to take cash out is really not there.

In case of any eventuality when u need to use it repay the full dues including non cash items as each bank has a different mechanism of calculating interest. Make outstanding zero and leave it like that for one to two days. There after start using credit card

The reason i am stressing this the rate charges is upwards of 20 percent and its impossible to reconcile how they calculate

Better be safe than sorry.

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I don’t think this will work well. Many credit card companies charge heavy interest or fees on cash withdrawn and there’s no free period on this. You should exercise caution when using this option.

Thanks for the heads up everyone, I now understand why it’s not really practical.

I experienced the same phenomenon relatively recently in 2018 when I was out for buying a PC, in the end I had to withdraw all of the cash from a nearby ATM and put it in a plastic bag, all of this just to avoid the extra “transaction fee” the shop was going to charge me if I was going to pay via card.

The only problem is you will be charged much more % when transferring to bank account.
Example: if you transfer money to bank ac from a credit card you will be charged 1.5% to 2.5%. Say if you transfer 50k you will be charged Rs 1k extra. So you transferring 50k to account and paying bill of 51k so tell me what is the benefit?