See not the ATM...

About six months ago I managed to rid myself of that financial noose that is credit card debt.

Subsequently I decided that it might be wise to keep a bit of plastic for emergencies, that is real emergencies, not for rounds on a Friday night in the pub/and or sales in HMV.

To avoid any conflict with my conscience, I asked my magic plastic provider to lower my credit limit to the most unimpressive level it could muster so that even if I did have another lapse of financial common sense I would still be avoiding anymore significant debt traps - once bitten etc.

But looking back on a few monthly statements I was shocked to learn the amount of times I was using my card to replenish my wallet at ATMs – this was something I had gotten into a habit of doing without quite realising it, or maybe I was just in denial. And this habit as well as making a few non-essential luxury purchases had brought me all that trouble which I ultimately knew was coming. But surely it is not all completely my fault? Clearly I was not surprised in the slightest when I saw research from Uswitch declaring that soaring rates on cash withdrawals could have added up to as much £334 in interest charges to credit card bills in almost two years.

This figure is a result of the average APR for cash withdrawals having rocketed by some 30 per cent from an average APR of 20.83 per cent to 27.06 per cent in the past 22 month. Although I cannot boast that I had added that sort of level to my debt, it still hurt at the time. Not that I really blame my provider for any of my reckless usage but I never did understand what this was costing me - why does the whole matter of credit card charges have to be quite so complicated. In May 2005, the Department of Trade and Industry’s reforms to the Consumer Credit Act 1974 came into force. The DTI had set out to make it easier for consumers to understand credit card charges, benchmark products and select the most appropriate card for their needs.

When cash rates were displayed as APRs they reflected the total charge for credit over 12 months, and took into account the effect of monthly compounding interest and all applicable charges and fees, such as the cash advance fees. The annual rate that the banks now display does not take into account compounding interest, fees or charges, and therefore appears to be lower than an APR. See easy, simplification indeed. Tell us your thoughts on credit card charging structures…

Comments

[Oliv]

If you take a closer look at a credit card website such as Natwest, Egg or any other provider, you will always see that there are instant charges on cash withdrawals. In fact, it should be a known fact by now as all credit cards providers charge you for this service...

Consequently, you either chose to ignore this when making cash withdrawals or you just never looked at the details while making a financial decision... and from a writer at Times Money, it's quite a shame!

[IVA]

My advice? Withdrawing cash from credit cards is a sure fire way to get into debt! Only use your credit card to make the purchases you know you can pay off. Don't get fooled into treating your credit card like your debit card!