Do you ever withdraw cash with your credit card? Thousands do – in fact – one in five people who currently own a credit card have used it for cash in the past, and this is costing everyone a lot of money.
You are probably aware of the cash machines which charge you £1.50 or £1.75 to withdraw cash, and withdrawing cash from a credit card works just like this, except the amount is added to the balance that you owe, rather than taken from your actual bank account. The amount charged can vary, but in the last 4 years it has gone up by around 20%, from around £2.81 to £3.34. This may not seem like a lot to pay for the convenience of being able to withdraw cash independently of your bank account, but over time this can add up. Credit card holders in the UK make an average of 7 cash withdrawals per year of around £90 at a time. This generates over £214 million in fees and charges overall, which is a lot of money!
A study from Totally Money has shown that people use their credit cards to take cash out for many reasons, the most popular being running short of money each month and for paying other credit card bills. Just over a fifth of the people asked withdraw cash through sheer laziness; they simply grab the first card in their wallet and go with that. One in four people asked didn’t realise that it cost money to withdraw cash from a credit card at all, and 31% were not aware that it cost them more than a normal credit card purchase.
What this cash is spent on is very revealing of the financial issues which face a lot of people in the UK today. A massive 1.1 million people were using credit card cash to pay for their utility bills, whereas 15% of people asked were using it for more general day to day expenses. This just goes to show how hard it is for families to make ends meet at the moment, with the cost of living so high and interest rates so low.
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According to the study, men were more likely to withdraw cash than women, and the 18-24 year old age bracket withdrew more cash than any other age group. The West Midlands had the highest proportion of cash withdrawals, closely followed by London. Of course, if you have a lot of money and you can afford to be flash with your cash (or card, in this case), then the odd withdrawal fee here and there may not be so bad, but if you’re using this money to pay for essentials, then this should set alarm bells ringing. Struggling with money is no fun, and so you should ask for help if you’re using debt to pay other debts repeatedly.
On the other hand, if your credit card payments are manageable and you’re happy to pay the extra in fees and interest to have the convenience of cash, then there’s nothing wrong with handling your money your way.
This article has been written on behalf of The Guarantor Gazette.