Customers caught out by unknown credit card cash charges

• Almost nine in ten (87%) don’t know there’s a cash advance fee when paying an entry fee for a fantasy football team, which is classified as gambling
• Six in seven (86%) have no idea a cash advance fee applies when purchasing a lottery ticket
• More than three quarters (76%) don’t realise a deposit on a gambling website incurs a cash advance fee
• More than six in ten (64%) don’t know that exchanging foreign currency triggers a cash advance fee
• Nearly half (49%) aren’t aware that cash withdrawals from an ATM incur a fee

A cash advance fee is added to any cash transaction on a credit card. But, this isn’t limited to just cash withdrawals. As exposed by the survey results, what classifies as a cash transaction isn’t clear. Most people don’t know that buying lottery tickets, entry fees for fantasy football, and exchanging foreign currency all trigger a cash advance fee.

A cash advance fee is charged as a percentage of the amount spent on the card, or a flat fee. For example, 3% or £3 per cash transaction — whichever is higher. For small purchases, the fee could be more than the item itself. For example, a lottery ticket costing £2 could incur a £3 cash advance fee, meaning the fee is 150% more than the ticket itself. This is before any interest is added. Interest charges will also usually apply from the moment the transaction occurs. Cash advance transactions are usually excluded from any 0% interest offers — leaving customers with even more to pay. The research calls into question whether more should be done by lenders and retailers to ensure customers know which transactions incur a cash advance fee.

Alastair Douglas, CEO of credit experts TotallyMoney, said: “If customers aren’t aware of a cash advance fee, they may use their credit card in the same way as a debit card. In some instances, people might not realise a fee or interest is added until they check their statement. Being aware of the fee allows customers to make cost-effective decisions when making purchases. “If you apply for a credit card, look at how much the cash advance fee is.”