Home Jersey finance news Swiping your credit card for cash is easy but illegal

Swiping your credit card for cash is easy but illegal


Credit cards are no longer a fashion statement. They offer several easy payment features for customers. And, in an emergency, they allow users to withdraw cash from an ATM, like a debit card.

However, not all credit cards offer this possibility. Where this is the case, one can only withdraw a certain percentage of the credit limit (around 40-50%) in cash. There is also no interest-free period available on these withdrawals; banks charge interest of up to 3.75% per month from the date of cash withdrawal until paid in full.

Some users have found a way around this and take advantage of the interest-free period. Some merchant sellers offer a “cash withdrawal facility” to individuals. By swiping the credit card, the merchant’s bank account is credited with the amount of the transaction and it is returned to the cardholder as cash, although for a nominal fee. Separately, the cardholder must repay the amount to the credit card issuer after the interest-free period and before the due date.

“These transactions usually occur at gas pumps and POS. Merchants tend to convert their black money or unrecorded earnings through such transactions and also collect fees from cardholders. credit,” said Deepak Suneja, Financial Services Expert, IP Pasricha & Co.

If you put aside the legality of the transaction, the objectives of the selling merchant and the cardholder are achieved. However, cardholders should beware of these transactions.

The risks involved

As long as cardholders can pay their dues on time, banks may not care about these transactions. But some experts call these transactions “illegal” and should be avoided.

Bharat Chugh, former Justice and Advocate at the Supreme Court of India, said: “These may be treated as fraudulent transactions by the credit card company as there is misrepresentation/fraud, both of the part of the merchant/merchant (who has an independent contract with the credit card company) and the customer.”

In addition to fines or penalties that the credit card company may charge, the card user may also run the risk of being blacklisted. If this happens, access to further credit will be impeded.

In some extreme cases, transactions could also be covered by anti-money laundering law, or black money law, if the merchant is trying to convert black money, Suneja said.

“In such cases, cardholders could be summoned by investigating authorities to verify their involvement and the authenticity of these transactions. If anything adverse is observed during this investigation, the cardholder could also be implicated,” Suneja added.

Cardholders may also find it difficult to dispute any discrepancies in these transactions because they are not legal. “This is a costly and potentially illegal practice, and customers are better off with a cash advance on the credit card. A cash advance, although expensive, at least guarantees security and little to no chance of being robbed or scammed,” said Adhil Shetty, CEO of BankBazaar.com.

New hacks

There are also new ways to bypass credit card cash withdrawal option coming lately. Some platforms such as Cred and Mygate allow users to pay rent by credit card by charging transaction fees. But a few customers, under the guise of paying rent, transfer money to the bank accounts of friends or relatives and then ask them to transfer the money. It’s like withdrawing money with a credit card.

According to the terms and conditions of Mygate, these transactions will also be qualified as “fraudulent transactions” and the necessary measures will be taken against the cardholders.

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