Mastercard

monseiur

Used Mastercard to withdraw €100.00 cash from ATM as Pass card would not work in the particular ATM Just recieved my monthly Mastercard statement today and it shows a charge of €2.54 'cash advance fee' plus €1.81 monthly interest charge - a total of €4.35 Considering that banks are paying something like 0.00001% annual interest rate I feel it's a bit of a rip off to be charging almost 2% monthly interest rate plus a cash advance fee. Considering moving to Revolt or similar, what rates do they and others charge ? (It's not so much the amount, which in my case is not huge, but the principal of the matter that bothers me !)

dotsman

Revolut (and similar) don't offer credit cards in Ireland. If it's simply a case that you don't want/understand credit cards, then simply cancel it - you don't need to switch banks to do so.

Using a credit card for a cash advance is always (and correctly) an expensive option. How much banks pay in deposit interest rates has nothing to do with it. It is all about risk.

odyssey06

Unless you keep a credit amount on your card, and withdraw cash only to that limit -> then the cash advance is always something of a rip off.

billbond4

If you had lodged 100€ into your credit card account (and not in credit) then it wouldnt have cost you

But beware, say you get scammed, the credit card company wont pay out on that 100€

HeidiHeidi

You need to read up on the charges associated with each type of card.

L1011

Not reading or understanding the very basic T&Cs of a credit card does not make them a rip off.

Xterminator

OP - you took out a small loan today.

when you take out cash on a credit card (assuming your not in surplus) its a loan. you took out their money with the intention to pay it back later. Its actually the very definition of a loan.

under 5 euro is a bargain alert rather than a ripoff.

walterking

Has been that way since the year dot in every country mastercard (and Visa) credit cards work.

Revolut (assuming they have not blocked your account) charge 2% on atm withdrawals after your "free" limit of €200 has been reached - even if you have €5k in your account. Also minimum charge €1, so if you withdraw €10, the revolut fee is effectively 10%

btw the ecb rate refinancing rate is currently 1.25% not 0.00001%

also, it is many many years since there were pass cards. Maybe the card is out of date?

monseiur

https://www.boards.ie/discussion/comment/119625999#Comment_119625999

My Pass Card is not out of date, works fine in BOI's hole in the wall. Not sure if Pass Card is the correct term for it but I have it for ages, so BOI may have more 'flexible' cards now, must check with them. I still maintain that charging a cash advance fee and high interest rate within the first 4 to 5 weeks is a rip off. The same rules should apply to cash as to paying of goods / services to a third party. Rant over!

Doodah7

https://www.boards.ie/discussion/comment/119626602#Comment_119626602

Your opinion is wrong. It is not a rip off. It's just that you don't seem to know how CREDIT works. Credit is not free, it costs.

Xterminator

op - ECB interest rate isn't 0.00001%. that's factually incorrect.

"The European Central Bank (ECB) has raised interest rates by 0.75 percent, the largest single increase since its founding in 1998, which as a consequence brings the base interest rate for banks up to 0.75 percent. "The governing council took today's decision and expects to raise interest rates further because inflation remains far too high," bank president Christine Lagarde told press on Thursday (8 September)."

https://euobserver.com/green-economy/156004

monseiur

https://www.boards.ie/discussion/comment/119626618#Comment_119626618

I happen to have a fair idea of how credit works, I know it costs, and have no problem paying reasonable rates, it's the exorbitant rates that bother me considering that bank interest rates are almost non existant.

Glaceon

Bank interest rates might still be relatively low but credit card interest rates can still be quite high, in the region of 20% APR. The €1.81 interest fee would put it in that ballpark. Cash advance fees are a thing with credit cards so I have always avoided that.

Draco

I would also note that Mastercard doesn't charge that fee, your bank does.

dotsman

https://www.boards.ie/discussion/comment/119626797#Comment_119626797

I happen to have a fair idea of how credit works

I'm sorry, I'm not trying to be rude, but it really doesn't look that way.

I know it costs

I don't think you do, because you then immediately say this...

it's the exorbitant rates that bother me considering that bank interest rates are almost non existant

As per my post above:

How much banks pay in deposit interest rates has nothing to do with it. It is all about risk.

Without writing a huge book explaining how credit works and how costs (and, thus pricing) are calculated, just think of it this way - a euro is a euro is a euro! The very same bank will lend at < 3% for a mortgage, 4-6% for secured business lending, 8-10% for unsecured personal lending, 15% for authorised overdrafts (with additional fees/penalties for unauthorised) and credit cards (with additional fees/penalties for late payments). The deposit interest rate and the ECB refi rate is the same regardless off how a bank lends to you. But the other costs are drastically different across the products, hence the huge difference in pricing.

The Credit Card market is hugely competitive with a lot of non-banks also offering credit cards, thus the rates they offer them is as cheap as they can and still make a profit.

monseiur

https://www.boards.ie/discussion/comment/119629416#Comment_119629416

Thanks for that. So can I ask a quick question - If deposit interest rates climbed to say 12%, like back in the late eighties, and mortgage rates etc pro rata would credit card interest rates be affected?

My thinking would be that 'of course all interest rates charged are interlinked and related' hence my reasoning that as deposit interest are at basically zero and mortgage rates are low (and lower across Europe) so one would expect some correlation with interest rates charged by Mastercard etc.

dotsman

Yes, there will be a correlation so, as interest rates rise, so too would credit card interest rate (on top of the existing credit card rates)

Another way to look at it is => price = cost of funds + cost of running + cost of fraud + cost of bad debt + profit

The underlying interest rates impact the cost of funds. But, you still have the cost of running/fraud/bad debt as well as the profit. With credit cards, the cost of running/fraud/bad debt are the ones that have the big impact. They are a high volume, low value form of credit offering (thus, the high running costs) with massive fraud (both from the cardholder and criminals cloning etc) and bad debt levels (unstructured, unsecured, where customers who use them for borrowing are typically high-risk) compared to other forms of credit like structured, secured lending.

walterking

https://www.boards.ie/discussion/comment/119636828#Comment_119636828

Yes.

Historically you will see that taking a loan via a credit card (this is effectively what you did) will be 15%-20% over the cost of funds.

Similarly a mortgage will be 2%-3% above cost of funds and a car loan 8%-10% above cost of funds.

Aside from a unregulated lender, borrowing cash (as in using a credit card in an atm) on a credit card is the most expensive form of credit and this is said time and time and time again. If you are stuck or abroad, it can be useful and the convenience may outweigh the cost.

BTW, this is not in small print in terms and conditions, almost all banks highlight this cost

Take it as a well priced lesson in how banks make their profits 😀