New research by credit experts TotallyMoney suggests Britons will pay an estimated £23.8 million solely on interest and transaction fees from using credit cards to gamble on 2018’s World Cup.
Credit card payments used for gambling are treated by lenders as a cash advance. This usually means the borrower is charged a transaction fee, a higher interest rate, and will start paying interest from the moment they transact.
The Free Credit Report company’s research follows a recent report by The Times that suggests Britons will wager £2.5 billion on 2018’s World Cup. Of all gambling deposits, it’s thought that 10–20% are made up from credit card payments.
TotallyMoney used data from Defaqto to calculate an average cash transaction fee of 3.23% and an average cash advance interest rate of 28.13%. Using these figures, they revealed that close to £23.8 million will be spent on interest and fees alone.
Knowledge is Power
Lack of knowledge is thought to be the main reason for incurring such costly fees. A TotallyMoney survey of 1,000 people revealed that only 1 in 10 are aware that lenders treat gambling with a credit card as a cash advance.
Often, gamblers won’t be aware of how much their bets have truly cost them until their credit card bill arrives. Even then, it’s easy for borrowers to miss these fees among the transactions listed.
Convenience may play a part in hiking up the total spend on interest and fees. Many save credit card details on their internet browsers for simple online purchases, making it quick and easy to place bets using the same information.
The research has also sparked concerns over the increased potential for borrowers to spend more than they can afford from using a credit card, which could compound their problems with debt.
The Gambling Commission has already suggested banning the use of credit cards for online betting. However, others have suggested this might not be necessary if gamblers are aware of the true cost of gambling with credit.
“Borrowers usually get an interest-free grace period on regular purchases, which doesn’t apply when a credit card is used to gamble,” TotallyMoney CEO Alastair Douglas said. “It’s easy to see why people think they have time to pay off their gambling debts without paying interest.
“Hopefully, knowing the true cost of placing a bet online will make people think twice before gambling with credit.”
TotallyMoney has been championing fairer and better consumer credit since 2007 by helping customers make smart borrowing decisions. They won Best Free Credit Report Provider in the 2018 Moneynet Personal Finance Awards and, in under 12 months, their Free Credit Report has already put 500,000 customers in control of their credit data.
Plus, TotallyMoney pioneered soft searching and eligibility scoring to reduce customers’ risk of being rejected for credit. Their services are designed to simplify personal finance, helping customers improve their credit rating and find the best products to meet their needs.