Why using credit cards in a casino is a losing proposition
By Bill Burton
In the casino, the only piece of plastic you should be whipping out in the casino is your players club card, so that you can earn points and comps.
“What’s in Your Wallet?”
That’s the catch phrase of a major credit card company’s advertisement, and if you’re like most Americans your wallet probably contains a credit card or two along with an ATM/debit card. In fact, the average number of cards per person in the United States is 3.5 cards. A published report showed at the end of 2009 there were 576.4 million credit cards and 507 million debit cards in circulation.
When a friend of mine pays a restaurant bill he likes to ask the cashier, “Do you accept cash?” They usually smile at the joke, but the reality is that each year more and more people are reaching for the “plastic” instead of the cash to pay for their purchases.
Many people have credit cards that are linked to a “bonus program” that offers cash back, airline tickets, or some other merchandise they can purchase with points they earn for each dollar they charge. This encourages people to charge items rather than pay cash for them. Credit card debt is the financial ruin of many people these days; it’s too easy to get caught up in the “buy now, pay later” mentality.
Here are few other facts. For households with credit card debt, the average of that debt is $15,788. According to the May 2010 Federal Reserve’s credit report, the average APR on credit card balances is 14.67 percent.
Part of the problem of credit card debt is that many of the people who use cards don’t know the finer details associated with their cards, and many have been unpleasantly surprised by hidden charges.
Several months ago, the passage of the Credit Card Accountability Responsibility and Disclosure Act of 2009, known as the Card Act, was intended to force card issuers to give customers more notice about interest rate increases. It also restricts certain controversial billing practices such as inactivity fees.
Since the passage of the new regulations, the credit card companies have been complaining that their revenues are down. They estimate that the new regulations will “cost” them about $390 million a year. Because of this they are looking for other ways to make up for their lost profits. Between July 2009 and March 2010, the average annual fee for a credit card jumped 18%, while the average cash-advance and balance-transfer fees jumped by 33%.
While they are some practicalities to carrying less cash, one place you should never use your credit card is at the casino. My number one rule of gambling is: Never bet more than you can afford to lose. Unfortunately, that’s exactly what you’re doing if you run out of money and decide to take a cash advance on your credit card at the casino. There are also hidden charges you may overlook if you decide to do this.
During one of my visits to the local casino, there was a long delay as I was waiting in line to cash my chips. I discovered the reason for this was that the two people in front of me were getting cash advances on their credit cards. When I got to the window, I inquired about the fee for taking one of these cash advances. I found out that this casino charges you a processing fee just for issuing you a check for the cash advance!
The amount of the fee is dependent upon how much money you want. To get a $500 cash advance, the charge was $21.99. That’s 4.4 % you have to pay the casino up front. You still have to pay your credit card company their fee for a cash advance, which varies by company but can run you two to five percent or higher. The interest rate that you pay for a cash advance is usually much higher than you pay for a normal purchase.
If for example, your credit card company charged three percent for a cash advance and you wanted an advance $500, it would cost you $15.66. (You’re actually borrowing $521.99 because of the casino’s fee.) This means you’re already down $37.65, or 7.4%, before you even sit down to play. That’s the equivalent of sitting down at a five-dollar blackjack table and losing eight hands in a row, or getting nothing back after you slide a couple of twenty dollar bills into a slot machine.
The following month, your credit card bill arrives. Your balance is $537.65. You also find out that on top of the three percent you had to pay to borrow the money, the interest rate for a cash advance is 5% higher than the normal 15% you pay for purchases. So how much will it really cost you? If you don’t make any other purchases on the card and pay only the minimum amount each month, it will take you over three years to pay the debt off. Depending on your exact interest rate, that will amount to over $700.
I know that you need to take a credit card with you when you travel to the casino to book hotel and car reservations, but they should never be used for cash advances to gamble with. Cash advances should be used for dire emergencies only. I don’t think a few more hands of blackjack, or more spins of the slot machine, falls into this category.
In the casino, the only piece of plastic you should be whipping out in the casino is your players club card, so that you can earn points and comps. If you ever need a cash advance for any reason, you should certainly be familiar with the “fine print” of your card and know exactly how much that transaction is really costing you. You may decide it’s not so necessary after all.
Until next time, remember: luck comes and goes, but knowledge stays forever.
Bill Burton is the author of “1000 Best Casino Gambling Secrets” and “Get the Edge at Low Limit Texas Hold’em,” which are available online at www.billburton.com. He’s also an instructor for Golden Touch Craps: www.thecrapsclub.com
Why using credit cards in a casino is a losing proposition.