Good idea to bench credit cards for March Madness bets
By the end of the 2023 NCAA tournament, an estimated one in four Americans will have wagered $15.5 billion in bets on the various games, according to the American Gaming Association. Last year, Matt Cappelen — a 34-year-old firefighter from Elk Grove Village, Illinois — would have been in the middle of the action. For this year’s dance, though, he’ll be sitting on the sidelines of the betting game.
Since legal online sports betting was first made available in Illinois in 2020, the fun of sports had only gotten that much bigger for Cappelen.
“I was able to combine making money, or so I thought, and sports,” he said. “What better way to do that than with gambling?”
But in the three years since, Cappelen built up $83,000 in gambling debts on sites like Bovada and Fanduel. Up to 90 percent of that, he says, was done on credit cards.
Each month, he used gambling winnings to make the next minimum payment on his credit cards, never worrying about how he would repay the debt.
Finally, after a crushing late-night loss on a particularly big bet, Matt confessed it all to his wife. He knew he needed help, and has since joined Gamblers Anonymous and registered for a debt recovery program. But because online sports betting has become so accessible, many more may walk the same road.
Regulation vs. risk
Since the 2018 overturn of the Professional and Amateur Sports Protection Act, which lifted a 26-year federal ban on online sports betting, more than 35 states have legalized the practice in some form. Of those, only a handful specifically prohibit the use of credit cards to fund bets.
“Using a credit card for gambling is definitely higher risk,” said Keith Whyte, executive director of the National Council on Problem Gambling. Yet he stopped short of noting any specific correlation between problem gambling and credit card use, citing a lack of research.
Because legal online sports betting in the U.S. is so new, data is scarce on the exact impact of credit card use for American gamblers. But in a 2021 study on general credit card spending, MIT’S Sloan School of Management found that by reducing the pain of payment, “(credit cards) ‘step on the gas’ by driving motivation to spend.”
And in Great Britain, where online sports betting has been legalized and widely available for much longer, the use of credit cards was banned in 2020. This ban came after a 2019 study by the United Kingdom Gambling Commission found “22 percent of online gamblers using credit cards (were) problem gamblers, with even more suffering some form of gambling harm. ”
Hidden costs
Other forms of gambling harm, Whyte explains, “might just include losing more money than you planned.”
When those losses are incurred on a credit card, interest and fees can far surpass the initial bet.
And if you’re not careful, late payments or spikes in credit utilization can have a long-lasting negative impact on your credit score.
Plus — because gambling policies vary widely by credit card issuer, payment processor, and betting site — fees can be unpredictable and add up quickly. These can include transaction fees, cash advance fees and even foreign transaction fees if the betting site happens to be offshore.
Sites like Fanduel do offer tools for gamblers to self-limit deposits, wagers and time spent. But in most cases gamblers have to opt into — not out of — such guardrails, and the options aren’t prominently displayed. Representatives from Fanduel did not respond to multiple requests for comment on this story.