Credit card issuers have increased rates on credit card cash advances by over 2% and been accused of profiteering.Below we explain just how costly this can be.
If You Draw Cash On Your Credit Card You Will Be Out Of Pocket.
It is a well known fact that drawing money out on a credit card at an ATM is costly but the staggering truth is that around 750 million pounds is withdrawn in this way every single month in the UK.The rates that the card issuers charge seem to be ever increasing at a time when they are already being accused of profiting with their exorbitant charges.
It seems that the biggest percentage of people who are doing this are people usually on low incomes or those who are finding it impossible to borrow money from anywhere else.
Research by the price comparison website Moneyexpert.com says that on average the APR (Annual Percentage Rate) for the ‘hole-in-the-wall’ clients has gone up by more than 2% in the last year from 21.27% to 23.48% and interest is charged from the moment the money is withdrawn from the machine. (Cheap Loans)
Added to this, as if that was not enough, there is a one-off fee for every single transaction done in this way.This charge can be anywhere from around 2.5% up to as high as 3%.
So, just so that we know in pounds what that means, if a person were to withdraw, and in effect borrow, 100 pounds it means that they will pay 25 pounds and 98 pence, over a quarter of the amount borrowed, if they do not repay it within the year.
Some card providers charge substantially more than that, for example, the Abacus cardfrom Vanquis charge 46.19% which is almost half of the amount borrowed which is extortionate.Also, where most other card providers charge an average of 15.9% on purchases, Vanquis charge an astonishing 39.9%. (Mortgages)
Vanquis is owned by a company called Provident Financial, and they are very quick to point out that the Abacus card is suitable for people with either a bad credit history and past debt problems or no credit history whatsoever.Basically, they are higher risk which is why they have to pay higher rates for the privilege of being able to borrow.