Tempted to withdraw cash on your credit card? DON’T!

As the credit crunch continues, credit card companies are heavily promoting cash withdrawals from your credit card but they do not make it clear how expensive this will be.

If you withdraw cash on your credit card you could be charged an interest rate in excess of 24% and also a withdrawal fee.

Even if you are someone who pays off your balance every month you will still be charged interest. This is because the interest starts to accrue from the day you withdraw the cash.

Many companies are also sending their customers blank cheques – with their names already printed on them. This is to entice you to fill in your own amounts and pay them into your bank account – very tempting if you are short of cash. What the credit card company does not tell you is that these cheques are treated the same as a cash withdrawal. Therefore you will be charged a fee and the extortionate interest rate. There is usually a fee of 3% of the amount of each cheque presented and the interest rate will be in excess of 24%.

Nowhere on the covering letter is the interest rate mentioned, just a note asking the borrower to refer to their statement for the interest rate charged.

Using a credit card sensibly is a good way of managing your finances and there are some very good deals out there – however, using them for cash withdrawals or funding your bank account in a great big no no !