Credit Card Cash Withdrawal Fees Go Up

The cost of using a credit card to withdraw cash is on the increase. Since November last year the average interest rate for cash withdrawal on a credit card, either in the UK or abroad, has increased by more than 2%. The average is now 23%, but the charges of one card, Vanquis, are an incredible 46% pa.

Banks appear to be fighting back in any way they can after consumers have begun to claim back unfairly high charges for such things as going overdrawn, or missed payments on credit cards. Charges that were as high as £25 have had to be cut to £12 or the bank would face legal action. Other fees and ways of recouping that lost money are being introduced by banks, inckuding a reduction in the interest-free period for purchases.

The APR on borrowing cash by credit card has gone up from 21.27% to 23.48% since last November last year. This means that anyone taking out £100 form a cash machine using a credit card would be charged £25.98 for the privilege, compared with £23.77 in November. These charges include a 2.5% cash withdrawal fee, chargeable in all cases.

This is an expensive way to borrow cash, and people should think twice before slipping their credit card into the hole in the wall for the purpose. It is easy to do, but you’ll pay for the convenience. A debit card is a cheaper way of withdrawing cash.

It appears that the introduction of Chip and Pin for credit cards has increased their use for cash withdrawals. Prior to that most people didn’t know their Pin number as they would sign for purchases. Now, as people have to know their Pin number to make a purchase, it is easy to use the number and the card to make a cash withdrawal. In the order of £750m is withdrawn from cash machines by credit card every month.

APRs range from the low charge of 5.6% from Co-op Bank, up to the amazing 46.19% on Provident Financial’s Vanquis card, but then it is meant to be for those with bad credit history who would be turned down by most providers. Despite its target market consumer groups and even MPs have criticised the card, as it puts the highest interest charges onto those who can least afford them. It is, some claim, immoral to charge such huge interest rates to people struggling financially. Provident say they are providing a service for those who could not get it elsewhere, and stress that no interest is applicable to consumers who repay their bills in full every month.

The high interest charged by credit card companies are not the only sting for those withdrawing cash. Customers can also expect to pay one-off charges for using their card for money – especially abroad. Withdrawal of £100 on holiday overseas could result in a one-off fee of £4.50.

Of the biggest credit card companies, nineteen of them have seen fit to increase their charges for cash withdrawal in the past year.

Tom Smith
18th June 2007