While both credit card cheques and regular bank account cheques may appear similar in form, they serve entirely different financial purposes. A cheque issued against a bank account allows you to withdraw from your own deposited funds. In contrast, a credit card cheque enables you to access funds as a form of short-term credit or loan extended by the bank.
Due to a lack of clarity and information, many cardholders encounter complications when using credit card cheques. This article outlines the fundamental distinctions and provides practical guidance to help ensure proper usage.
Essential Considerations Before Using a Credit Card Cheque
Verify Your Available Credit Limit: Before issuing a credit card cheque, ensure that your available credit limit can accommodate the cheque amount. If the cheque exceeds your limit, it may be dishonored, and the bank may impose a cheque return fee. Always confirm your current credit availability before proceeding.
Card Cheque Processing Fees: Banks typically charge a processing fee when funds are withdrawn using a credit card cheque, as per their prevailing Schedule of Charges. To avoid over-limit situations, ensure that the withdrawal amount plus the applicable fee remains within your credit limit.
Maintain a Buffer in Your Credit Limit: It is advisable not to fully exhaust your credit limit. Interest charges, profit margins, maintenance fees, or other applicable charges may apply based on your card’s terms. Leaving a buffer helps prevent your account from exceeding the limit and incurring over-limit penalties.
Understand Over-Limit Charges: In the event that your credit card balance surpasses its approved limit due to any transaction or associated fees, an over-limit fee will be charged. Regular monitoring of your balance can help you avoid this. To know more about Over Limit, Just Click Here.....
Account Payee Only: Credit card cheques are typically account payee instruments and cannot be encashed over the counter. They must be deposited into a bank account for clearing or fund transfer purposes.
Institutional Policy Restrictions: Some issuing banks may restrict the use of credit card cheques for transfers to accounts under the same cardholder’s name. For instance, The City Bank Limited does not allow its American Express cardholders to deposit card cheques into their own accounts. Always review your card issuer’s policy on cheque usage or consult their call center for confirmation.
Before utilizing a credit card cheque, ensure you are fully informed about your issuing bank’s policies, applicable charges, and transaction procedures. When in doubt, reach out to your bank’s customer service for precise and updated guidance.