Australians gearing up for tonight’s $80 million Powerball lottery draw could also unwittingly be opening themselves up to excess fees.
While the odds of winning this lottery draw are 134,490,400 to 1, there is a high probability you will pay excess credit card fees if you use that to buy your lottery ticket.
That’s because the banks consider gambling transactions as a cash advance — meaning it may charge a higher interest rate as well as additional cash advance fees. And you’ll begin paying this interest immediately, even if you’re still in your card’s interest-free period.
Some credit card providers, like American Express, ban gambling transactions altogether.
Others, like ANZ, CommBank, NAB and Westpac will charge a cash advance rate of around 21 per cent on these transactions.
But according to finder.com.au analysis, this rate can be as high as 29.49 per cent.
Credit card users will also be charged a cash advance fee in addition to the interest charges. The fee is generally worth 2 to 4 per cent of the transaction.
What’s the damage?
Finder gave the example of a gambler who uses their credit card to place $2,000 worth of bets. This credit card has a 3 per cent cash advance fee and a cash advance rate of 21.99 per cent per annum.
If this gambler currently has a 0 per cent balance and pays off the total amount later that day, they would pay $1.20 in interest, another $60 for the cash advance fee. The bet now costs $2,061.20 in total.
But if they paid if off after 30 days, assuming this is the only transaction on the card, they would pay $60 for the cash advance fee and $36.15 in interest. So, they’ll pay $2,096.15.
However if the gambler chose to only pay off the minimum amount each month, they would pay a staggering $5,735 over 16 years and nine months.
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