How Cash Withdrawals Impact Your HSBC Credit Limit
Using your HSBC credit card for cash withdrawals might seem like a quick and easy way to access cash, but it can significantly impact your credit limit.
Understanding how these withdrawals affect your available credit is essential to avoid surprises and manage your finances wisely. Here’s everything you need to know about how cash withdrawals influence your HSBC credit limit.
How Does a Cash Withdrawal Affect Your HSBC Credit Limit?
When you make a cash withdrawal with your HSBC credit card, the amount you withdraw is immediately deducted from your available credit limit. This means if you have a $5,000 credit limit and withdraw $1,000 in cash, your available credit will be reduced by $1,000, leaving you with only $4,000 in available credit.
Are There Any Additional Impacts on Your Credit Limit?
- No Increase in Credit Limit: Unlike regular purchases, cash advances do not come with the same perks. Your credit limit won’t be replenished automatically once you make a payment. You’ll need to repay the cash advance to regain your full credit limit.
- High Credit Utilization: Cash withdrawals, combined with high-interest rates, can quickly increase your credit utilization ratio. A high utilization rate (the percentage of your available credit that you’re using) can negatively affect your credit score, as it indicates a higher reliance on credit.
Cash Advance Fees and Their Impact on Your Credit Limit
On top of reducing your available credit, cash advances also come with fees. Typically, HSBC charges a fee based on a percentage of the amount withdrawn (e.g., 4%), and this fee is added to your credit balance. So, if you withdraw $1,000 in cash and incur a $40 fee, your total balance will increase by $1,040, further reducing your available credit.
How Quickly Does Your Credit Limit Recover After a Cash Withdrawal?
Once you repay the amount you withdrew, including any fees and interest, your credit limit will be restored to its original value. However, this can take time depending on how quickly you pay off the balance. If you only make partial payments, your available credit will remain limited until the entire balance is cleared.
Minimizing the Impact of Cash Withdrawals on Your Credit Limit
If you absolutely need to use your HSBC credit card for cash withdrawals, here are some strategies to minimize the negative impact on your credit limit:
- Repay Quickly: The faster you repay the cash advance, the sooner your credit limit will be restored to its full value.
- Avoid Frequent Withdrawals: The more frequently you use your credit card for cash advances, the higher the chances of affecting your credit score due to high credit utilization.
- Plan for Repayment: Make sure you have a clear plan to repay the withdrawn amount, including the associated fees and high-interest rates, as soon as possible.