Making a cash withdrawal on your credit card could cost you extra in fees and interest and may have a negative impact on your credit score.
That’s according to financial experts at Moneycomms and TotallyMoney who have revealed credit card cash withdrawals cost people a total of £219 million in fees and interest last year.
They are trying to raise awareness amongst credit card customers that every time they make a cash transaction they are charged a withdrawal fee. On top of this a higher interest rate than is added on to standard purchases is also applied.
The investigation found some withdrawal fees were as much as £6.25 each time and the average interest rate using a credit card was just over 25%.
With over 36 million credit card cash transactions during 2018 many people would have been paying extra to withdraw money in this way.
The outcome of the research also raised concerns people might be damaging their credit score by making cash withdrawals on their credit cards.
Andrew Hagger, personal finance expert from Moneycomms.co.uk, who carried out the research, said: “If you withdraw cash on your credit card, it will show up your credit record and could be a danger sign to other lenders that may look at your record in the future.
“Prospective lenders may think you’re making cash withdrawals on your plastic because you have no money left in your current account.”
He added: “Paying over £6 to withdraw £125 is a high price to pay. Unfortunately too many people are oblivious to the damage a credit card ATM withdrawal does to both their wallet and their credit record.”
Foreign currency and gambling transactions
Meanwhile the research also highlighted another problem which could create additional costs for credit card customers. It is not just ATM withdrawals which are classified as ‘cash transactions’ – gambling payments and foreign currency purchases can also be included in this too.
Indeed, in a recent TotallyMoney survey less than one in ten customers realised gambling transactions were treated as cash transactions.
Alastair Douglas, CEO, of TotallyMoney said: “You end up paying more than you think because of the extra interest and charges.
“Many consumers are also unaware that interest on cash transactions is charged at a higher rate compared to credit card purchases. What’s more, that interest will apply the moment the cash transaction takes place, whereas regular transactions often don’t incur interest until your statement arrives.”