The Royal Commission into misconduct in banking has shone a light on how banks’ flout the rules about responsible lending by offering to increase customers’ credit limits. The Commission heard from one customer who even told his bank he had a gambling problem and he still got offers to increase his credit limit.
What few people realise is how lucrative it can be for a bank when customers use their credit card for gambling.
Let’s imagine a scenario where a customer uses their credit card to pay $200 using an online betting agency. This is the way most credit cards will work:
Even in the best case where the customer pays the entire statement balance by the next due date, it is likely the customer has paid about a month’s interest on the cash advance.
So on the $200 gambling payment, a customer is likely to have paid a $4 cash advance fee and about $3.50 in interest – assuming they paid it all back on the due date. That’s a whopping 45% annualised return for the bank.
With returns like that, do banks really care about customers using credit cards for gambling? If the banks really cared about people gambling, perhaps they would donate the profit they make on gambling activities to gambling support services.
By the way, gambling includes things like purchasing lottery tickets.
There are a number of ways you can avoid these exorbitant credit card costs for gambling.
If you need help with gambling problems you can contact:
Peter is the CEO of MoneyBrilliant. He has over 20 years experience in banking, insurance and accounting. Peter has three sons, ranging in age from 16 to 3, is a sport and fitness fanatic and a volunteer firefighter. He is passionate about improving people's lives through making financial services more accessible.