Credit card users warned over cash transactions

Consumers in the UK that use their credit cards on a fairly regular basis are being warned over using their cards for cash transactions. Consumers have started using credit cards for all sorts of purchases, but some people also withdraw cash on their cards and use them for cash transactions, which can end up costing them dearly.

The interest rates that credit card companies charge on cash withdrawals and transactions are significantly higher than the standard rate of interest. Many consumers are already aware that it will cost them more to take out cash on their credit cards, and therefore avoid doing this. However, they often fail to realise that there are other transactions that are classed as cash transactions, and therefore incur the same higher rate of interest.

There are a number of transactions that consumers may make using their credit cards without realising that they are cash transactions, and this includes gambling with a credit card, buying postal orders, gift vouchers, and travel money with their credit cards, and making electronic money transfers using their credit card. All of these can result in higher rates of interest being charged.

Cardholders are therefore being advised to ensure that they familiarise themselves with the transactions that their credit card provider classes as cash transactions, as otherwise they could be hit with huge interest charges without realising it.

One financial industry expert said: “Credit card users have to be careful how and where they use their card. The vast majority of consumers are aware that withdrawing cash on a credit card can be a costly exercise and should be avoided. However, many people do not understand where else their provider will treat purchases as cash withdrawals and can be fooled into making a pricey mistake.”