Definition of cash transactions extended by credit card issuers

Some credit card companies in the UK have shocked consumers by extending what can be construed as a cash transaction in a bid to get extra money from credit card customers. It is though that these credit card companies may have made this move in order to try and recoup some of the profits that have been lost through the ceiling cap that was placed on credit card penalty fees by financial regulators in the UK last year, as many experts feel that credit card companies are using all sorts of tactics in order to get more money off consumers to make up for these losses.

According to recent reports a number of credit card companies have decided to extend the list of transactions that can be construed as cash transactions, which means that consumers making these particular transactions will be charged a higher interest rate and additional fees. Amongst the transaction that are being classed as cash transactions are the purchase of gift vouchers using a credit card, and also using a credit card for online gambling.

Credit cards generally charge a much higher rate of interest for cash transactions, and also a cash handling fee, which all adds up to a real expense for the cardholder and a tidy profit for the credit card company. In addition to this many card companies have increased the fees and interest rates on cash transactions recently, which makes this type of purchase all the more expensive for the consumer.

A Uswitch official stated: 'Credit card providers are squeezing every last penny out of consumers to recover the millions of pounds they lost when the OFT capped their penalty fees at £12. Cardholders are being bamboozled. They don't know whether they will be charged at the much higher cash withdrawal rates on a whole raft of credit card transactions unless they scour the small print in their terms and conditions. There's no standard definition of what will be classed as a cash withdrawal. And since millions have more than one credit card they'll have to remember which card charges for certain types of purchases as cash and which don't. The situation is farcical.'

Tom Smith
7th May 2007