Research from the price comparison and switching website uSwitch.com has
revealed that almost a million Britons believe they are not being
charged when they withdraw cash using their credit card.
In addition, 80% of those polled did not understand what charges they
would incur from ATM withdrawals on credit cards overseas and the vast
majority of shoppers were shown to be unaware that cash rates have
increased by 30%, from an average rate in May 2005 of 20.8% APR to the
equivalent today of 27.06% APR.
Nick White, Director of Financial Services at uSwitch.com, said: “Some
providers are now charging up to the APR equivalent of 31.23% on cash
withdrawals, which is higher than the average sub-prime credit card of
30.9% APR.
“People who use a credit card to withdraw cash may already be struggling
under the burden of debt and are having to resort to this method of
borrowing to make ends meet.”
Mr White continued to say that while uSwitch.com accepted that credit
card providers have to make money and that cash withdrawals carry a
higher risk of people getting into bad debt, it is “indefensible” for
lenders to penalize their “most vulnerable” customers.
Other financial slip-ups which consumers aren’t aware of include the
fact that cash withdrawals on a credit card are not eligible for an
interest free period, so customers pay interest on the amount withdrawn
from the day of the transaction.
Also, following changes made by the Department of Trade and Industry
back in 2005, the annual rate that the banks now display does not take
into account compounding interest, fees or charges and therefore appears
to be lower than an APR.
If you’re paying too high an interest rate on your cards then it’s time
to transfer your balance to a different card. uSwitch.com’s impartial
and comprehensive service lets you compare credit cards so you can find
the one with the best rates and switch online, for free. Do a balance
transfer and cut your interest today.
