Last updated: December 19, 2024
With mobile sports betting expanding across the US, bettors are increasingly using credit cards to fund their accounts. However, a Consumer Financial Protection Bureau (CFPB) report warns that these transactions are treated as cash advances, incurring higher fees and interest rates.
With Missouri now expected to enter the fray sometime next year, provided no other states legalize and start online sports betting this year, around 30 jurisdictions along with Washington, DC should offer real, authentic mobile wagering which does not call for a visit to the bricks-and-mortar casinos.
Nevada is “the offender” in that case, but the reality is anywhere from eight to nine of every 10 sports wagers in the US are placed via a computer or mobile device and bettors love the convenience. They should also be wary of funding their accounts with credit cards.
A new report put out by the Consumer Financial Protection Bureau suggests that most sportsbooks, which accept mobile account funding via credit card-a method all sportsbooks use-classify those transactions as cash advances rather than normal charges, which could end up leaving bettors exposed to a higher cost than those paying with cash or using debit cards tied to a checking account.
It is also almost impossible to avoid cash advance fees. CFPB noted that in the seven largest card issuers in the US, all included in their cardholder agreements the characterization of lawful gaming services as cash advances.
Credit Card Fees: Another Cost
This is not a new phenomenon, wherein credit card companies classify gaming-related charges as cash advances. It has been going on for quite some time; however, the Consumer Financial Protection Bureau (CFPB) is pointing this out in an era when sports betting in the United States is expanding dramatically.
Another way to look at the fees of a cash advance is as a type of added vigorish. A standard -110 sports bet involves the bettor risking $110 for a potential win of $100, the difference between which is the vigorish or simply a cost of doing business charged by the gaming companies. Including the cash advance charges in this equation will raise the price of the action dramatically.
According to the CFPB, cash advance fees often range from $10, making smaller cash advances particularly expensive. That is, a person who makes purchases of $20 may pay the same $10 fee as a person who uses his card to withdraw $200 in cash at an ATM. According to the study, the average cash advance APR discovered in the agreements is 30 percent, which kicks in even if the cardholder would not normally be charged interest on everyday purchases.
Another important factor is that cash advances, along with fees, are not included in cash back, miles, points, and other rewards types that the card issuers give.
Sports Betting is bringing more cash advances Despite the above challenges, it can be observed that most sports gambling individuals are using credit cards to finance their mobile operations.
A spokesman also noted that, two weeks ago, the CFPB published data from two states: after sports wagering became legal in those jurisdictions cash advance activity soared. Through CFPB’s limited analysis on just two case studies in areas that legalised sports gambling according to the timing from how often our data indicated their major issuers released payments within a month that had started when people could make sports bets legally, according to the bureau, credit-card accounts with cash advances paid a fee, jumping enormously in the first month
