Credit card withdrawals are becoming increasingly expensive, yet many people remain unaware of the true cost of credit card withdrawals. uSwitch looks at how credit card withdrawals can impact cardholders.
What’s happening with credit card withdrawals?
Research from uSwitch shows that over 1 million people are making credit card cash withdrawals to pay their mortgages, loans and household bills.
As the recession bites and household finances come under further strain, many people are resorting to making credit card cash withdrawals to make ends meet.
What’s more, the cost of credit card withdrawals isn’t just affecting those struggling financially – the research showed that many people are unaware of the true cost of these credit card withdrawals.
A shocking 69% of people who make cash withdrawals don’t know how much it costs them
and 12% wrongly believe it’s no different to a debit card withdrawal.
Another 13% believe they incur only a single cash withdrawal fee when they use an ATM overseas to make a credit card withdrawal. In fact they incur a cash handling fee, a foreign exchange fee and a higher interest rate with no interest free period.
What does this mean for me?
The important point to consider when you make a credit card cash withdrawal from a cash point machine, either at home or abroad, is that unlike standard credit card purchases, cash withdrawals aren’t eligible for an interest-free period.
Therefore you’ll pay interest from the day you make the credit card withdrawal. Cash withdrawals are also often charged at a higher APR than the standard rate you pay on purchases.
What can I do about credit card cash withdrawals?
If you can use a debit card or pay another way then do so. It will work out cheaper than a credit card cash withdrawal. Even paying for a purchase using your credit card may end up being cheaper than using your credit card to withdraw cash for the purchase.
If you have to make a credit card cash withdrawal, clear your balance as soon as you can. Otherwise the credit card withdrawal you’ve made will continue to accrue interest.
Alternatively, if your current account has an overdraft facility try using it or extending it, if possible. Overdraft facilities are generally cheaper than credit card cash withdrawals. You may also get the benefit of an interest-free period in which to clear the balance.
Another possible option is to take out an unsecured personal loan, especially if you are going to need to borrow the money for an extended period.