Don’t cash in on your credit card at christmas

Cash withdrawals cost average minimum of £2.60 at average rate of 21.27%

Christmas shoppers and revellers tempted to turn to credit cards for some extra cash will pay a high price for the convenience, warns MoneyExpert.com

Analysis* by the independent financial comparison website reveals that the average APR on a cash withdrawal is a hefty 21.27 per cent ñ with only eleven providers charging under 15 per cent.

And even if you pay off the balance, each credit card cash withdrawal costs an average minimum fee of £2.60 ñ or for larger withdrawals an average 2.46 per cent is levied. That means for every £100 you get from a cash machine with your plastic this Christmas, providers will charge an average £2.60 up front followed by a further £21.82 in interest for the first year unless you repay the debt.

And if all you need is £20 to tide you over, youíll pay the same £2.60 fee ñ thatís the equivalent of paying 13p in the pound just for taking out £20.

Sean Gardner, MoneyExpert.comís chief executive, said: ìItís tempting to use your credit card to tide you over for some extra cash. But the advice for consumers is simple. Donít use your credit card to take out cash at an ATM. Itís one of the most expensive forms of borrowing around.

ìIf you are withdrawing cash use your debit card. Machines from the major banks and building societies donít charge you for taking out your cash. Only use your credit card for purchases.

ìCard firms argue that credit cards are for purchases rather than for withdrawing cash so they charge a premium for those who use them for cash. Itís worth bearing in mind that the most expensive debts are usually paid off first which will mean if you are carrying a balance that youíll pay the full interest on the cash.”

Recent figures suggest that around £750 million is taken out of Britain’s cash machines using a credit card every month**. MoneyExpert.com warns that unless customers have read the small print for their credit cards they could be in for a shock when they realise how much they have been charged for cash.

Sean Gardner added: ìThereís never a cheap time to withdraw cash with your plastic. There may be a good time ñ particularly in emergencies ñ but when thatís the case the cost of the process is not usually under consideration. With so many ways to pay for products and services these days, the cost of cash shouldnít be the major reason for your choice of card.”

Providers that offer competitive interest rates on cash advances include: Co-Operative Bank, and Intelligent Finance**.

Providers that do not charge a fee for withdrawing cash with a credit card include: Egg, Abbey and Co-Operative Bank***.

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Notes *Source: Defaqtoís Aequos database

** Source: APACS – cash acquisition (withdrawals at a cash machine or cash withdrawn over the counter) on UK-issued credit and charge cards in Britain in 2005 amounted to £9.2bn, with another £1bn withdrawn abroad.

***Product details:

Co-Operative Bank Clear Visa Credit Card ñ cash withdrawals APR 9.9%, no fee

Intelligent Finance Flat Rate Credit Card: Cash Advance Fee 2% (minimum £2); cash advances annual rate from 8.94%

**** Product details:

Egg Card: If you hold another Egg account when you take out an Egg Card, you won’t pay a cash advance handling fee. Otherwise, a handling fee of 3% of the withdrawal amount (minimum fee £3) applies. For cash advances thereís a yearly interest rate of 22.9% pa (variable).

Abbey Flat Rate Credit Card: 10.9% p.a. withdrawing cash. No fees for withdrawing cash Co-Operative Bank Clear Visa Credit Card ñ cash withdrawals APR 9.9%, no fee

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