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Withdrawing Cash and Credit Cards

Perhaps over the past few years but especially over the past few months, many banking institutions have been at the front end of a major controversy as a result of “extreme” and “unwarranted” charges which have been passed onto the customers.

It is a serious situation which companies such as the FSA are trying to put right but where does this put us in terms of the charges which are implemented on most credit cards?

There is a huge different between the two as credit card lenders are by law expected to list all charges from the onset and before any contracts are signed.

The facility of being able to withdraw cash on a credit card can be an excellent benefit should it be required but it can prove expensive if it is used all too frequently. With a credit card, there is really no need to use such a facility as often as all stores will accept credit cards and therefore sees the facility being deemed useless.

Withdrawing cash on a credit card

If you are trying to compare credit cards then it would be an idea to compare the rates for withdrawing cash because all lenders will charge a fee for cash being withdrawn from a typical ATM machine so if you draw out £20 then you could expect a mark up of around 2% but the exact fee is stated in the small print.

Should you decide to have a credit card then the APR and interest rates may vary as well as the withdrawal charges but with VISA or MasterCard being accepted in millions of stores and restaurants, you need to ask yourself if using such a facility is actually worthwhile.

You will find that many people and sometimes lenders advise against withdrawing cash because with constant use of this system it will lead to a large number of what could be classed as “avoidable” charges (the charges laid down by a lender apply per withdrawal) and over a year this could increase your monthly repayments by around 50%.

Do companies need to make these charges?

This is an area which is widely disputed and this question is often asked. In most cases, such a small charge could be completely warranted because with most banks / building societies, there could be a slightly cost to them for accepting cash withdrawals on a credit card which is charged to the relevant lenders and then passed onto you, the customer.

If such a facility is used so rarely then a £2 charge would not be noticed but any frequent use would soon become extremely noticeable.

For example:

If you were to withdraw cash 100 times a year, based on £2 withdrawal fee it would total £200 in charges alone and many forget that the total percentage charged is based on the exact sum that is withdrawn.

There may be situations where you cannot avoid withdrawing cash and as a once off this is acceptable but if you are going to compare credit cards then I would suggest looking at the rates for withdrawing cash at the same time because whilst most may have a set rate, it could be higher or lower depending on the lender.

Always know what the charges are before withdrawing any cash and this way, there won’t be any surprise charges at the end of each month. You will instantly be charged on the spot for any cash withdrawals so just bear in mind that your monthly repayments will comprise of charges from any cash withdrawals that you may have made.

If you don’t need to withdraw cash then don’t because it could potentially save hundreds of pounds each year and plus, in such a modern technological society, who needs cash?

It seems that “plastic” is the way of the future so compare all credit cards wisely whilst bearing in mind all possible charges and this way, you won’t get any surprises.

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