Banning credit card gambling a good move

COMMENT

I WAS delighted to read the news earlier this week that gamblers can’t now use credit cards to place bets either online or offline.

At a stroke, this helps to deal with two of the biggest debt problems facing consumers in the UK – excess gambling and excessive use of credit cards at high interest rates.

I know that the two are linked, and the reason the Gambling Commission took the action that they did is because they are linked.

That’s because tens of thousands of people use credit cards to gamble money that they don’t have, then chase these losses on credit cards using more money that they don’t have.

According to the Commission, about 24million people in the UK gamble and almost half of those place bets online.

More than 20 per cent of those having a punt online are classed as “problem gamblers” and most will use credit cards, so if the new legislations helps to stop these people losing any more money then it must be a positive move. But the other thing that happens when gamblers use credit cards to gamble is that they are classed as if they were withdrawing cash from their credit card, and this means that they would have been charged very high rates of interest on the money used for these bets.

It’s very easy to forget the high rate of interest charged when you take cash out of a credit card – often the annual percentage rate is in excess of 30 per cent.

That means that if you maintain a balance of £2000 for 12 months, you’ll pay more than £500 in interest alone.

That’s why it’s so difficult to clear the balance on credit cards once you get started, and why so many people only seem to service the interest costs without actually seeming to reduce the money they owe.

I’ve said here before that credit cards are great if you use them for the consumer protection they offer, and if you can afford to pay them off in the short term. Otherwise, give them a wide berth.