Credit card gamblers could be paying through the nose
Credit cards have become an important part of the nation's financial makeup; however ambiguous charges and fees could leave consumers paying over the odds on certain transactions when whipping out their flexible friends.
MoneySupermarket.com has conducted analysis into a wide range of transactions treated as a ‘cash advance' by credit card providers. A cash advance, in most cases, is charged at a much higher rate of interest than standard purchases on the card, with the interest also accruing from the date of the transaction. As well as the traditional ATM withdrawals, all of the UK's major credit card providers also treat any form of gambling activity on a credit card as a cash advance and as a result anyone using a credit card to gamble may face higher APRs for transactions.
Consumers paying for gambling activity with the Virgin Credit Card, for example, will find themselves being charged 27.9 per cent APR, 12.1 per cent higher than their advertised standard purchase APR of 15.8 per cent.
In additional to gambling, transactions including purchasing foreign currency, electronic money transfers, postal orders and the purchase of traveller's cheques are also treated as cash withdrawals.
Kevin Mountford, head of banking at MoneySupermarket said: "As with any financial product, when using a credit card consumers must ensure they understand the terms and conditions or may find themselves paying through the nose for certain types of transactions. Most consumers are aware that taking cash from an ATM on a credit card can be expensive, however what providers treat as a ‘cash advance' can be confusing and consumers need to exercise caution. A rule of thumb is that any transaction which buys you cash or the equivalent of cash, for example, gambling chips, will be charged at the higher rate of interest and the transaction won't benefit from the interest free period you get on standard purchases.
"The increased popularity of online gambling means more people are potentially falling into this easily avoidable trap, with APRs on some products almost doubling for cash transactions. As a result, gamblers are dramatically reducing their odds of turning a profit. Consumers hitting the casino should also be aware that purchasing food, drink and other goods in a gambling establishment can bring about these cash withdrawal charges, so best to pay with cash or a debit card.
"It's perhaps not widely known that any kind or money transfer or travel money purchase made on a credit card is charged in the same way as a cash withdrawal meaning holidaymakers could be losing out on some serious spending money. Credit cards are hugely useful products and simply understanding how providers charge before pulling out the plastic means consumers can avoid those little charges that soon add up and ensure they get the most bang from their buck. If you are planning to use a credit card abroad for cash withdrawals, remember you may also be charged other fees as well, so what seems like a convenient way of getting cash could prove to be costly,"