Brits spend £4.6 billion in credit card cash transactions, resulting in £219 million paid in charges.

Embargo 00.01 Thursday 21st March 2019

  • Credit card cash cost consumers a total of £219 million in fees and interest last year
  • Average cash transaction was £125 last year
  • Withdrawal fees cost up to £6.25 for £125 transaction plus interest on top
  • There were more than 36 million credit card cash transactions in 12 months
  • Average interest rate on credit card cash transactions is 25.04% pa

 

Research carried out by financial advice website Moneycomms.co.uk and supported by credit experts TotallyMoney has revealed that credit card cash withdrawals cost UK consumers £219 million in fees and interest last year.

In the 12-month period, there were more than 36 million credit card cash transactions. The average amount withdrawn or spent was £125.

Every time a consumer makes a credit card cash transaction, they’re charged a withdrawal fee and (compared to standard credit card purchases) a higher interest rate applies. Some withdrawal fees cost up to £6.25 every time, and the average interest rate for cash purchases using a credit card is 25.04%.

The result of cash spending using a credit card between December 2017 and November 2018, meant British consumers gave credit card companies a total of £219 million in fees and interest.

 

Commenting on the findings, Alastair Douglas, CEO of credit experts TotallyMoney, said: “Credit cards are a vital part of our financial armoury. They give us flexibility and financial backup for covering emergencies and unexpected costs.

“However, withdrawing cash using your credit card is a very expensive habit that’s best avoided. It often costs people far more than they realise.

The problem is that cardholders may not understand what their card provider classifies as ‘a cash transaction’. It’s not just ATM withdrawals. It can be gambling transactions and foreign currency purchases too.”

Douglas added: “In a recent TotallyMoney survey, less than 1 in 10 customers realised that gambling transactions are treated as cash transactions. 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.”

But the cost goes beyond the initial charges and fees. Andrew Hagger, Personal Finance Expert from Moneycomms.co.uk, who carried out the research, explains: 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.”

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.”

 

Workings

36,112,000 cash transactions at average fee cost £3.88 = £140,114,560

£4,588,000,000 interest at 22.5% x 28 days = £79,190,137

Total £140,114,560 + £79,190,137 = £219,304,697

 

Interest rates and withdrawal fees for each major UK credit card provider

Card Provider Cash Interest Rate PA Cash advance tariff Withdrawal fee for £125
American Express 27.90% 3% (min £3) £3.75
ASDA Money 27.90% 3% (min £5) £5.00
Bank of Scotland 19.90% 3% (min £3) £3.75
Barclaycard 27.90% 2.99% (min £2.99) £3.74
Capital One 34.90% 3% (min £3) £3.75
Clydesdale Bank 27.90% 3% (min £3) £3.75
Creation Cards 27.90% 5% (min £5) £6.25
First Direct 24.70% 2.99% (min £3) £3.74
Halifax 19.90% 3% (min £3) £3.75
HSBC 27.90% 2.99% (min £3.00) £3.74
John Lewis F S 23.90% 2.5% (min £2.50) £3.13
Lloyds Bank 19.90% 3% (min £3) £3.75
M&S Bank 23.90% 2.99% (min £3) £3.74
MBNA 27.90% 5% £6.25
Metro Bank 13.00% No fee £0.00
Nationwide B S 17.90% 2.5% (min £3.00) £3.13
NatWest 25.90% 3% £3.75
Post Office Money 27.90% 2.5% (min £3.00) £3.13
RBS 25.90% 3% £3.75
Sainsbury’s Bank 25.90% 3% (min £3) £3.75
Santander 29.90% 3% (min £3) £3.75
Smile 25.90% 3% (min £3) £3.75
Tandem Bank 18.90% 2.5% (min £2.50) £3.13
Tesco Bank 24.90% 3.99% (min £3) £4.99
The Co-op Bank 27.90% 3% (min £3) £3.75
TSB 18.90% 3% (min £3) £3.75
Virgin Money 27.90% 5% £6.25
Yorkshire Bank 27.90% 3% (min £3) £3.75
Average 25.04% (22.5% simple)   £3.88

Research by Moneycomms.co.uk from provider websites 04 Feb 2019

 

No of Cash Advance Transactions Value of Cash Advance Transactions
Dec-17 2,693,000 £334,000,000
Jan-18 2,903,000 £362,000,000
Feb-18 2,774,000 £337,000,000
Mar-18 2,832,000 £355,000,000
Apr-18 3,158,000 £372,000,000
May-18 3,093,000 £408,000,000
Jun-18 3,142,000 £420,000,000
Jul-18 3,280,000 £443,000,000
Aug-18 3,289,000 £441,000,000
Sep-18 2,921,000 £377,000,000
Oct-18 3,176,000 £393,000,000
Nov-18 2,851,000 £346,000,000
Total 36,112,000 £4,588,000,000

Research by Moneycomms.co.uk from UK Finance Data 04 Feb 2019

 

For more information, please contact James McCaffrey

About TotallyMoney

TotallyMoney has been championing fairer and better consumer credit since 2007 by helping customers make smart borrowing decisions. We won Best Free Credit Report Provider in the 2018 Moneynet Personal Finance Awards and since its launch in 2017 our Free Credit Report has already put more than one million customers in control of their credit data.