Be aware of the true cost of credit card withdrawals

June 5, 2007

Those of us who use credit cards to withdraw money from ATMs are paying the price for this convenience. Since November 2006 the annual percentage rate (APR) has risen by over 2% from 21.27% to 23.48%. In some extreme cases where customers have poor credit ratings this figure can rise to as high as 46%.

Consumer experts condemn the credit card companies’ greed and urge people against obtaining cash in this fashion, pointing out that it is almost double the cost of using a typical debit card’s overdraft facility.

Based on these figures someone withdrawing £100 from an ATM by means of their credit card accrues £25.98 in charges over the year based on the latest APR increase.

Despite such high charges, it is estimated that every month in the region of £750m is withdrawn from ATMs by means of credit cards.

Last year the Office of Fair Trading instructed credit card firms to cut its charges from approximately £25 to no more than £12 or face legal action, and it has notably been since this happened that such companies are looking to recoup their losses by whatever means they can. One way is to increase the APR, another is to reduce the length of time for interest free options.

Head of MoneyExpert.com Sean Gardner says “Borrowing cash on your credit card is incredibly expensive and unless it is really necessary we would urge people to think twice before doing it.” He goes on to urge those who cannot resist using their credit cards to withdraw cash to make a point of clearing the balance on their cards as quickly as possible.