do not use your credit card to purchase a lottery ticket
Australians gearing up for tonight’s $ 80 million Powerball lottery draw could also unintentionally face excessive fees.
Although the odds of winning this lottery draw are 134 490 400 to 1, there is a high probability that you will pay excess credit card fees if you use them to purchase your lottery ticket.
This is because banks view gambling transactions as a cash advance, which means they may charge a higher interest rate as well as additional cash advance fees. And you will start paying this interest immediately, even if you are still in the interest-free period of your card.
Some credit card providers, like American Express, prohibit gambling transactions altogether.
Others, like ANZ, CommBank, NAB, and Westpac, will charge a cash advance rate of around 21% on these transactions.
But according to finder.com.au’s analysis, that rate can reach 29.49 percent.
Credit card users will also be charged a cash advance fee in addition to interest charges. The fees are typically 2 to 4 percent of the transaction.
What is the damage?
Finder gave the example of a player who uses his credit card to place bets worth $ 2,000. This credit card has a cash advance fee of 3% and a cash advance rate of 21.99% per annum.
If that player currently has a 0% balance and pays back the full amount later in the day, they would pay $ 1.20 in interest, plus $ 60 for the cash advance fee. The bet now costs $ 2,061.20 in total.
But if they paid after 30 days, assuming it was the only transaction on the card, they would pay $ 60 for the cash advance fee and $ 36.15 in interest. Thus, they will pay $ 2,096.15.
However, if the player chose to pay only the minimum amount each month, he would pay $ 5,735 over 16 years and nine months.
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