In a recent study of UK Credit Card data, it was highlighted that one in five of us use our Credit Cards to withdraw cash. UK citizens, on average, withdraw funds to the tune of £213.64 million.
In the golden age of credit, many older readers will remember how easy it was to get a Credit Card, and with a certain naivety, how tempting it was to use the card to access more money. It was unwise then, and it still is now, with many young people (18-24 year olds) repeating the same mistake.
According to the survey, 25% of those polled were oblivious to the fact you pay a charge for withdrawing money on your Credit Card, and you’ll often pay a higher interest rate.
Over 55s are far less prone to withdraw money on their Credit Cards. We can speculate that this is down to the fact that they’ll often have more a stable job and therefore a better cash-flow.
18-24 year olds tend to suffer from temporary jobs and unreliable incomes. This leaves them in a situation where borrowing on their Credit Cards seems a better option than a dreaded Payday Loan.
The average amount of cash withdrawn on a Credit Card is a handsome £92.89 which suggests that the people making these transactions are withdrawing the money for a ‘purpose’ rather than for casual spends.
Nevertheless there is some obliviousness involved in the issue. Out of the 6million consumers who withdraw cash on Credit, 40% had cash-flow issues and an alarming 21% were simply grabbing the first card in their wallets. 1.2million people used their Credit Cards to obtain cash in order to pay other bills.
Despite record low interest rates, the average cash withdrawal via Credit Card involves a stealthy £3.34 transaction fee. The banks seem to be targeting these transactions as a source of revenue, although they might claim to be discouraging clients from using credit as access to cash comes with a punitive fee.
If you are inclined to use a Credit Card for cash, sign up for a card which is suited to this transaction. The Halifax Clarity Card, doesn’t incur a transaction fee and if you use a service like Totally Money and their Credit Card comparison services you will be able to see which other cards suit your needs.
Those who use Credit Cards for cash may argue that the fees (including interest) are cheaper than an overdraft charge and are less risky than a Payday Loan. This is a fair point, but doesn’t distract from the fact that the situation is far from ideal.
There are definite regional correlations in the data, which once again indicates that, at the heart of the problem lies a lack of money. The North East is particularly afflicted with over 56% of the population running out of money at the end of each month.
Men are also more likely to make Credit Card withdrawals than women, and women tend to be more aware of the potential pitfalls.