According to a survey out earlier this week, January 2 was the most depressing day of the year. With most of us having put on a few extra pounds and many bank balances having shed more than a few, this is hardly surprising.
But if your finances are in poor shape, think twice before using your credit card to withdraw cash from a hole in the wall. This has always been one of the most expensive ways to get hold of money. In recent months it has become even more expensive.
According to Moneyfacts, the comparison website, a large number of card providers increased their annual interest charges on cash withdrawals last summer, in some cases by as much as 5.4 percentage points. In addition, cash withdrawal charges have also been hiked. A year ago, the typical cash withdrawal charge was around 2 per cent with a minimum charge of £2. Now, cash withdrawal charges are around 2.5 per cent with a minimum charge of £2.50 or even 3 per cent (with a £3 minimum).
Capital One charges the highest interest rates on cash withdrawals, according to Moneyfacts. As soon as you withdraw cash on a Capital One credit card from an ATM, you start clocking up interest at 34.94 per cent a year. NatWest, Royal Bank of Scotland and Barclaycard are also expensive with NatWest and RBS charging annual interest on cash withdrawals of 23.01 per cent, according to Moneyfacts, and Barclaycard 27.9 per cent.
Capital One also charges the highest cash withdrawal charges at 3 per cent with a minimum fee of £3, making this one of the most expensive ways of borrowing money. Saga’s Visa credit card is one of the most competitive for cash withdrawals, although still by no means a good deal. Its interest rate on cash withdrawals is 16.9 per cent with a cash withdrawal charge of 1.5 per cent (minimum £1.50).
If you need to access cash using your credit card while abroad, expect even higher charges. In addition to high interest costs and cash withdrawal charges, you will usually be hit with an overseas currency loading, typically 2.75 per cent. Credit cards from Nationwide and the Post Office charge no currency loadings on overseas purchases or cash withdrawals.
Source: The Financial Times
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