Average APR on cash withdrawals is 23.48 per cent, MoneyExpert.com analysis shows
Credit card firms are cashing in on customers who use their plastic to borrow cash, according to new analysis* by MoneyExpert.com. The average APR charged for customers using an ATM and not clearing the balance is now 23.48 per cent – up more than two per cent compared with 21.27 per cent in November 2006.
And while 23.48 per cent is big enough it is just an average – the highest on the market is an eye-watering 46.19 per cent, the independent financial comparison website says.
Card firms have been pushing up rates and introducing new fees and charges in response to a regulatory clampdown and a slide in profits as customers switch cards to chase deals.
Recent figures suggest that around £750 million a month is withdrawn from ATMs using credit cards and MoneyExpert.com warns customers to pay off the balance if at all possible or face hefty charges.
Even those who do pay off their balance will be charged – card firms impose a fee for withdrawing cash on your plastic which can be as high as three per cent. Only Egg Money does not charge.
MoneyExpert.com is urging people who are intent on taking out cash to consider using their overdraft facility on their debit card instead of a credit card. Average authorised overdraft rates are just 12.3 per cent, almost half the average credit card cash withdrawal levy.
Sean Gardner, Chief Executive of MoneyExpert.com, said: "Borrowing cash on your credit card is incredibly expensive and unless it’s really necessary we’d urge people to think twice before doing it.
"The average APR was already expensive enough but card firms have pushed up rates by more than two per cent in the last six months. There are so many cheaper ways of borrowing than 23.48 per cent.
"It can be tempting to use you credit card to take out cash but if you do you should clear the balance as soon as possible. Using a debit card for cash withdrawals is almost always the best idea."
Not all card providers charge high APRs on cash withdrawals – Co-Op Bank’s Base Rate for Life Visa charges 5.6 per cent. The highest APR is Vanquis’s 46.19 per cent.
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* Analysis of the Defaqto Aequos Database 22.05.07