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| Withdrawing at the cash machine.. | |
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You may have heard that credit card companies charge more for withdrawing at cash machines - ok, I heard about that too, but how much more am I paying and is it best to withdraw lots at a time, or should I be withdrawing small amounts, and often? I’m going to break this down into a few sections and give a few resources - because there are a few places on the internet that explain parts of this really well. a) If you’ve got a balance transfer deal If you’ve got a balance transfer card, and you’re in your balance transfer promotional period, then DON’T withdraw any cash from a machine - you’ll end up paying interest and because the amount you’ve withdrawn is paid off AFTER all promotional balances, it means that you might be building up interest for quite a long time! b) Fees that you have to pay when you withdraw cash Most credit card companies (if not all!) charge you a fee for withdrawing cash. The standard cash withdrawal charge seems to be 3% (minimum £3.00) - Capital One, Virgin, Halifax, RBS, Vanquis and Egg all have the same handling fee. The student Barclaycard cash withdrawal charge is 2.5% (minimum £2.50), and the Post office credit card has withdrawal charge of 2.5% as well but with a minimum of £3. These charges are all fairly similar, so there is no outright winner on this. What it does mean though is if you withdraw small amounts at a time (e.g. £10) then you’re going to get hit with a minimum of £2.50 or £3 charge - which is pretty painful! If you withdraw over £100 then you’re going to start paying a % of what you’re taking out. The most cost efficient way to withdraw cash (with regards to the fee you have to pay) then is to do it in big lump sums. What about the interest rate? Now you know what fees you’re going to be paying for withdrawing cash, how much interest do you have to pay on the money you borrow? Currrently (as of 29th August 2008) Halifax - Monthly APR is 1.805% and annually 23.95% Egg - Monthly APR is 1.873% or 1.941% and annually 24.9% or 25.9% Student Barclaycard - Monthly APR is 1.167% and annually 14.9% Apart from the Student Barclaycard, the other two examples above show how high the interest rate can be if you withdraw cash. 24.9% per year sounds pretty high - but obviously what you end up paying depends on how quickyl you pay it off. There’s a great repayment example at http://www.barclaycardstudent.co.uk/summary_box.htm - which gives you an idea of how much you have to pay to get rid of your debt. So.. you have to pay a withdrawal fee when you take cash out with your credit card.. and you get hit with a higher interest rate. When researching the credit card that suits you most, look at these two figures and think about whether you’re happy with what they are charging. If you are going to use a cash machine, definitely don’t take £10 out at a time though! Click here for more general information on some of the credit cards mentioned. |
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