CFPB Says Sports Gambling Drives Spike in Credit Card Cash Advance Fees

The CFPB reported a surge in credit card cash advance fees following the legalization of sports gambling in multiple states.

In a "Data Spotlight," the agency defined "cash advances" as "a feature of many credit cards that allow consumers to obtain cash or cash equivalents for a fee." The agency said that major credit card issuers "charged consumers $717 million in fees on $3.6 billion in overall cash advance volume in 2022, representing an average fee around $1 for every $19 spent."  

The CFPB concluded that (i) most major credit card issuers classify sports wagers as cash advances; (ii) "cash advances [can] incur high fees as a percentage of the transaction amount and start accruing interest from day one." (The CFPB said that for sports betting, the cash advance fees often have a minimum charge of $10, making smaller cash advances particularly costly.); and (iii) "[d]isclosures made by credit card issuers about cash advance fees for online betting are not always clear or consistent." The CFPB said that consumers expressed confusion over the fees, describing them as "sneaky" and "unfair," while card issuers and sportsbooks were criticized for unclear disclosures.

The CFPB found that cash advance fee rates spiked in states like Kansas and Ohio after gambling legalization. Specifically, the agency found that Kansas had 8,000 more accounts charged fees in the first month post legalization.

The CFPB said it is monitoring the issue and suggested state regulators consider limits or improved transparency on credit card use for gambling.