Ahead of the NFL playoffs and the upcoming holidays, an independent agency in the United States responsible for consumer protection in the financial sector warned that the use of credit cards for sports betting may surprise some betting aficionados with unexpected fees.
Increase in Cash Advance Fees
The announcement came from the Consumer Financial Protection Bureau (CFPB) which released a new report, warning about an increase in the so-called credit card cash advance fees following sports betting legalization. The extra fees, frequently titled as “cash advance” fees are applicable to sports betting transactions.
If a credit card company supports placing wagers with sportsbooks on credit, it is likely that such fees apply to each bet. Per the CFPB’s new report released earlier this week, the common cash advance fees are based on the “greater of $10 or 5%.” The report follows a review of credit card agreements by seven credit card companies that supported betting on credit and charge cash advance fees.
Sports betting is available in 38 states across the country. However, only several states enforce a ban on gambling with credit cards with the list including Iowa, Massachusetts, Tennessee and Rhode Island. Elsewhere, bettors can place wagers with their credit cards but unless they want to be surprised by fees that will bite into their winnings, they need to review their credit card contracts.
Once Betting Launches, Cash Advance Fees Increase and Remain Higher than the National Average
Notably, CFPB’s new report pointed to data comparing the increase in cash advance fees in states before and after the legalization of sports wagering. This data pointed to an interesting trend where upon the initial launch of sports betting, a spike in cash advance fees is explored and while the initial increase settled down, the fees still remained high when compared to the rest of the country.
The report explains: “The monthly share of accounts charged a cash advance fee spiked in some states once sports gambling became legal. While correlations between allowing wagers on sports and cash advance fees do not necessarily show a causal relationship, an interesting trend emerges when looking at accounts in Kansas, Missouri, and Ohio.”
A graph within the new report reveals that Kansas recorded a notable increase in cash advance fees after launching legal sports betting. A similar but smaller in size increase was recorded in Missouri, while the growth of cash advance fees in Ohio reached a level closer to the spike in Kansas. This trend highlighted the possible relationship between cash advance fees and sports betting. In all three aforementioned states, as of 2024, the cash advance fees remained higher than in the rest of the country, per CFPB’s report.
