BANKING customers are blowing millions of pounds between them by making a simple cash machine mistake.
Using a credit card to withdraw money from ATMs, known as a cash advance, comes with costly charges and higher interest rates.
In fact, a quick £20 withdrawal could cost you up to £3.92 in fees and interest, according to research carried out by MoneyComms for credit check site TotallyMoney.
Meanwhile, the average cash withdrawal of £137 could land you with an additional £10.49 in fees and interest.
Credit cards typically allow up to 56 days to pay off any spending you do using your card before you start being charged interest.
But if you take the money out of the ATM as cash, you'll pay interest on that balance from day one.
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The research found First Direct, HSBC, M&S Bank, Santander and Tesco Bank charged the most on £20 withdrawals – £3.92 on average.
Meanwhile, Virgin Money charged the most on £200 withdrawals – charging £19.17.
Barclaycard charged the least for £20 and £200 withdrawals, at £1.36 and £13.62 respectively.
TotallyMoney's research also found just 44% of adults are aware using a credit card to withdraw cash can result in added fees and higher interest rates.
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Not only that, but cash advances appear on your credit file as well.
This is because withdrawing cash with your credit card can lead lenders to assume you don't have cash in your bank account.
This can make it less likely you'll be approved for loans or can borrow money in the future.
It's not just ATM withdrawals that can see you landed with hefty fees.
Buying foreign currency, getting cashback, electronic transfers and paying a utility bill can all come with fees too.
It's worth double-checking the small print on your credit card to ensure you're aware of what you might pay.
Alastair Douglas, chief executive officer of TotallyMoney, said: "If you need quick cash and are thinking about putting your credit card in the ATM then think again.
"These transactions come with extra fees, often with a higher interest rate, and they can make it more difficult to borrow in the future.
"They can be particularly costly if you’re making multiple, smaller withdrawals, as you could pay £3.46 just to withdraw £10.
"Some banks will even apply these charges if they think you’re using a credit card for cash-like transactions.
"These include making repayments on buy now pay later purchases, paying off utility bills and fines, or buying foreign currency."
What are your other options?
If you're worried about being hit with credit card withdrawal fees and extra interest, you have some options.
You won't be charged to withdraw money when using a debit card, but of course you will need cash in your account to do this.
Alternatively, some credit cards don't charge you a cash withdrawal fee, like the Halifax Clarity Card and Barclaycard's Rewards card.
However, both these cards still charge you interest from the moment the money leaves the cash machine so can still prove expensive.
Another option is a money transfer card – these allow you to transfer money from your credit card into your current account.
You can then withdraw the money out of your current account using your debit card.
But bear in mind you often have to pay fees for transferring money on these cards.
For example, if you had a credit card with a 4% money transfer fee and moved £1,000 from your credit card into a bank account, you would be charged £40.
A Nationwide spokesperson said the bank charges the same APR for both purchase and cash withdrawals.
They added: "Customers should only withdraw cash from a credit card as a last resort as the cost will be higher than for making purchases.
"If a customer is struggling financially we would encourage them to contact us as we can discuss more suitable options to support them."
A Santander spokesperson said: "Customers can use their personal debit card to make fee-free withdrawals at ATMs.
"We provide all our credit card customers with details around the charges for withdrawing cash from an ATM when they open an account."
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A Virgin Money spokesperson declined to comment.
The Sun has approached Barclaycard, First Direct, HSBC, Halifax, Lloyds, M&S Bank, MBNA, NatWest, RBS, Sainsbury's Bank and Tesco Bank for comment.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
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