July 24 2014 Latest news:
Adam Aiken, Editor
Thursday, June 21, 2012
Consumers are being warned to be wary when using credit cards, with an array of fees and charges meaning that flashing the plastic can be far from straightforward.
Using a credit card is the preferred way to pay for millions of people, and with the growth of internet shopping over the past 15 years plus the recent introduction of contactless payments, more consumers are using cards.
But unlike using cash, consumers are often charged for the privilege of using their cards, depending on what they use them for.
There have been plenty of warnings about the risks of using a credit card to withdraw cash from a hole in the wall – this type of transaction starts to clock up a high rate of interest straight away, and it is an expensive form of accessing your cash.
But there are other types of transaction that some people carry out without realising they count as cash advances.
Any form of money transfer, buying postal orders and purchasing travel money are all transactions that are classed as cash advances. Use your credit card for one of these and you will see the charges quickly add up.
Making a deposit with a credit card on a betting website also constitutes a cash advance rather than a purchase.
Analysis by Moneysupermarket.com has found that the interest charged for these “cash advances” typically ranges between 23pc and 28pc.
“With all financial products, it is really important to check the terms and conditions applied, and credit card users should be extra careful about how and where they use their card,” said Kevin Mountford, head of banking at Moneysupermarket.
“Most consumers are aware that taking cash from an ATM on a credit card can be expensive.
“However, many may not understand where else their provider will treat purchases as a ‘cash advance’, and they could end up making a pricey mistake.
“A rule of thumb is that any transaction which buys you cash or the equivalent of cash 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.”
Mr Mountford added: “Credit card users may also not be aware 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.
“Avoiding unnecessary charges is essential as they soon rack up and can end up being a very costly mistake.”