Having a credit card has many benefits. Besides being able to be used for shopping transactions, credit cards also offer cash loan facilities for users. The loan can be an alternative source of funds to open a business or start a business.
If a credit card user needs a loan, you can take advantage of the credit card cash facility. The money comes from your credit card limit. Usually the loan value is around 40-50% of the remaining credit card limit.
Understanding Credit Card Cash Funds
Then the loan will be sent to your account. The bill will be added to your credit card bill so you can pay in installments every month. So don’t be mistaken, credit card cash is different from credit card cash withdrawals at ATMs. The difference lies in the maximum limit of funds that can be disbursed and interest.
If the customer withdraws the credit card cash, get ready to charge and high interest. While cash withdrawal funds are lower with a tenor in accordance with the policy of the credit card issuing bank. There are banks that set up a period of 3 months to 24 months with an interest of 1%. The longer the tenor, the lower the interest rate.
Credit Card Cash Mechanism
A simple example like this, you have a credit card with a limit of $50 million, and only used $10 million this month, meaning there is still $40 million left. Then, the card issuing bank offers you a credit card cash facility. Because you need to make additional capital, you agree to the offer.
After you meet the requirements, because the maximum loan value is only 50%, a liquid loan worth Rp20 million. The next stage, you just repay the debt along with the interest according to the specified tenor.
Same with KTA Products?
Many people equate a credit card cash withdrawal fund with an Unsecured Credit (KTA) facility. But if examined, there are differences between the two. Let’s discuss the KTA.
Understanding KTA is a bank loan product without asset collateral. So customers don’t need to be confused about having collateral to apply for a KTA. Need funds quickly, KTA solution. Whether it’s for business capital, wedding costs, medical expenses, to home renovations.
The loan repayment process is done in monthly installments, the period of which is also determined by you. Usually ranges from 12 months to 60 months. If you are late in paying the installments or pay them before they are due, then there is a penalty fee charged.
In addition, many are tempted by KTA because of low interest promos, such as 0.99% per month. But if you pay attention again, KTA loans calculate interest in a flat 0.99%, meaning that the amount of interest expense per month is still (flat), even though the remaining principal loan continues to decline every month.
The calculation of effective interest is more accurate when compared to flat interest for a borrower, because interest is calculated based on the remaining principal of the loan. Flat interest calculations, it will look as if the interest is small, even though it is not.
If the calculation of flat interest is converted to effective interest, then we actually borrow with interest of 21% to 24% per year or 2% per month, not 0.99% anymore.
Cash Credit Card or KTA, Which Which?
Credit card cash and KTA cash facilities have the same benefits as an alternative source of funds. Each has advantages and disadvantages, so as a customer, you need to know all the conditions when applying for the loan. Now, the choice is yours. But one thing to remember, the name of the debt must be paid on time so as not to cause other problems that will result in debt swelling.