24.7 C
New York
HomeTop Global NewsWhy You Shouldn't Buy A Lottery Ticket With A Credit Card

Why You Shouldn’t Buy A Lottery Ticket With A Credit Card

While it may be tempting to snag a lottery ticket right now as the Powerball Jackpot spikes to $1.73 billion – the second largest in history — buying your ticket with a credit card could cost you.

A lottery ticket purchased with a credit card is likely to be processed as a cash advance, which leaves you with high fees and no rewards.

CNBC Select explains the drawbacks of buying a lottery ticket with a credit card and what to do instead.

What’s a cash advance?

A credit card cash advance is when you withdraw money from your credit card, essentially borrowing cash against your card’s line of credit. You can typically get a cash advance in various ways, including at an ATM, in person or with a convenience check.

While a cash advance may be convenient when you, say, don’t have sufficient funds readily available in your checking account, it will cost you an extra set of fees, such as ATM, bank and cash advance fees. Cash advance fees typically amount to 3% or 5% of the total cash advance withdrawn. For example, a $500 cash advance with a 3% fee will cost you $15.

Cash advances also come with higher interest rates compared to purchases or balance transfers and lack of grace periods. This means you’ll start accruing interest from the date of the cash withdrawal.

Why buying a lottery ticket is likely to be processed as a cash advance 

Most credit card issuers classify lottery ticket purchases as cash-equivalent transactions (despite the terrible odds of you actually winning any money). Capital One, for instance, states on their website that other “money transfers, gambling and quasi-cash transactions” such as lottery tickets or gaming chips may also be classified as cash advances by your credit card issuer. “If you use your credit card for these transactions, you may be charged a cash advance fee and a potentially higher cash advance interest rate.”

Compare offers to find the best savings account

Why you should buy your lottery ticket with cash instead

Axos Bank CashBack Checking

  • Monthly maintenance fee

  • Minimum deposit to open

  • Minimum balance

  • Rewards

    Earn up to 1.00% cash back on all transactions that require a signature.

  • Free ATM network

  • ATM fee reimbursement

    All domestic ATM fees reimbursed

Subscribe to the CNBC Select Newsletter!

Money matters — so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money, right to your inbox. Sign up here.

Bottom line

Why trust CNBC Select?

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of financial productsWhile CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best products.

Catch up on CNBC Select’s in-depth coverage of credit cardsbanking and money, and follow us on TikTokFacebookInstagram and Twitter to stay up to date.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.

Source link

latest articles

explore more


Please enter your comment!
Please enter your name here