Credit card Cash costly at Christmas

With the peak shopping season on our doorstep, it's not unusual for many Christmas shoppers to turn to their credit cards to get some extra cash for that perfect present. But getting cash this way could cause long term financial pain, warns MoneyExpert.com. The average annual percentage rate (APR) on cash withdrawals is 21.27 per cent, making this a costly way to boost the Christmas coffers.

Only 11 providers charge less than 15 per cent for cash withdrawals. Even for those who pay off the balance, the costs are still high, with the charge for withdrawals at an average of £2.60 or 2.46 per cent for larger sums. That means you pay £2.60 up front plus £21.82 in interest for the first year. Even for small sums the fee is the same, so a £20 withdrawal could still cost you 13 pence for the withdrawal.

So what's the best move for shop-happy consumers? Whatever they do, they shouldn't withdraw cash with their credit cards unless it's a real emergency. Instead, debit cards are best as most banks and building societies don't charge customers to withdraw their own cash.

Credit cards, on the other hand, are an expensive form of borrowing, with most providers charging a premium. In addition, because of the way debts are repaid on credit cards (the most expensive paid off first), you could be paying for that Christmas shopping cash for a long, long time.

APACS research suggests that Brits are using their credit cards to withdraw £750 million a month from cash machines. That added up to £9.2 billion last year, with another £1 billion withdrawn abroad. That could cost them dear once payback time comes around.

Instead, consumers should take MoneyExpert's advice that 'there's never a good time to withdraw cash with your plastic' unless it's a real emergency, in which case you may not worry about the cost.