With the introduction of chip and pin there is set to be an increase in the number of people who take out cash using a credit card, Bradford & Bingley has warned.
While many credit card providers offer consumers a month or more before they start chagrining interest on purchases made by credit card, cash withdrawals are charged interest from the moment they are taken out, and have a fee of two per cent or £2 (whichever is greater) at the time.
Until now many people have decided to not memorise their credit card pin numbers to stop the temptation of withdrawing cash on them, but with the advent of chip and pin every consumer will have to know their code to use their card at all.
This will increase the temptation to use credit cards for things like cash withdrawal.
Bradford & Bingley has found that the number of 18-29-year-olds withdrawing cash on credit cards is set to double after the advent of chip and pin.
"Although chip and pin has been devised first and foremost to provide security and reduce the likelihood of fraud, there is a very real possibility that it will also increase the amount of cash withdrawals on credit cards," said Michael Senior, head of personal lending at Bradford & Bingley.
"A major underlying problem with this is that cash advances on credit cards are often charged at a much higher rate. We would impress upon card holders, who plan to make cash withdrawals using their credit cards, to think about the added cost implications and whether there are cheaper alternatives."
Currently 18 per cent of UK adults already frequently withdraw cash on their credit cards, but this is set to rise to 30 per cent following the introduction of chip and pin.
Not all credit card companies charge the same amount on cash advances on credit cards, with Nationwide's fee just 1.5 per cent, but Bradford & Bingley is advising consumers not to use their card for cash withdrawals while they have other options.To read more about the different credit card offers available, click here.
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