Warning over higher rate card purchases

Most people are aware that they have to pay a higher interest rate, often around 11 per cent more than their standard APR, if they use

their credit card to get cash, compared with if they use it to buy something.

But financial website moneysupermarket.com said there is a much lower level of awareness about other transactions that many card issuers treat as if they had been cash advances.

The group said all of the UK's major credit card issuers treat any gambling paid for using a card as if it was a cash advance.

It said the purchase of foreign currency and traveller's cheques, electronic money transfers and buying postal orders using a credit card are all also typically treated as cash withdrawals.

As a result, people who use their cards for these transactions could find themselves paying interest of up to 34.9 per cent on the money borrowed.

Kevin Mountford, head of banking at moneysupermarket. com, said: "Credit card users have to be careful how and where they use their card.

"The vast majority of consumers are aware that withdrawing cash on a credit card can be a costly exercise and should be avoided.

"However, many people do not understand where else their provider will treat purchases as cash withdrawals and can be fooled into making a pricey mistake."

He said credit card users should make sure they knew exactly which transactions would have interest applied to them as if they had been cash advances, to avoid exposing themselves to higher charges.

n A third of Britons have raided their savings during the past six months with many using the money to meet their day-to-day living costs, a survey showed this week.

Around 36 per cent of people have withdrawn more from their savings account than they have paid into it during the period, with the average savings balance falling by 1,400 to 12,300, according to Investec Bank.

Four out of 10 people who withdrew money said they had used the cash to cover the cost of living, such as paying their mortgage or rent, while 27 per cent used it to pay for a significant purchase, such as a car or home improvements.

A quarter of people spent the money on a holiday, with 14 per cent splashing out for another special occasion, such as a wedding or birthday celebrations.

Around 18 per cent of people either gave or lent the money to family and friends, while 10 per cent invested it in property or shares and 2 per cent paid it into their pension.

Linda McBain, head of banking at Investec Bank, said: "It's clear that the recession is continuing to bite and that millions of savers are withdrawing cash deposits to make ends meet."

The research also found that 34 per cent of savers have no idea how much interest they are receiving on their savings, while 26 per cent have only a rough idea.

People in London are most likely to have withdrawn money from their savings account to cover day-to-day living costs at 51 per cent, compared with just 21 per cent of people from Yorkshire and Humberside.