While it may be tempting to grab a lottery ticket now that the Powerball jackpot increases to $1.73 billion – the second-largest in history – purchasing your lottery ticket with a credit card could cost you dearly.
A lottery ticket purchased with a credit card will likely be processed as a cash advance, resulting in high fees and no rewards.
CNBC Select explains the downsides of buying a lottery ticket with a credit card and what you can do instead.
A credit card cash advance is when you withdraw money from your credit card, so you’re essentially borrowing cash against your card’s line of credit. Typically, you can get a cash advance in a variety of ways, including at an ATM, in person, or with a convenient check.
While a cash advance can be convenient if, for example, you don’t have enough funds in your checking account, it does incur additional fees, such as: B. ATM, bank and cash advance fees. Cash advance fees are typically 3% or 5% of the total cash advance withdrawn. For example, a $500 cash advance with a 3% fee will cost you $15.
Cash advances also come with higher interest rates and no payment deadlines compared to purchases or balance transfers. This means that you will accrue interest from the date of cash withdrawal.
Most credit card issuers classify lottery ticket purchases as cash-like transactions (despite the terrible odds that you’ll actually win money). Capital One, for example, states on its website that other “funds transfers, gambling and quasi-cash transactions” such as lottery tickets or gambling chips may also be classified as cash advances by your credit card issuer. “If you use your credit card for these transactions, you may be charged a prepayment fee and possibly a higher prepayment interest rate.”
If you still want to use a credit card to purchase a lottery ticket, it may not even be possible. In a number of states, including Massachusetts and Georgia, purchasing a lottery ticket with a credit card is illegal.
Therefore, it is best to use cash, which can also help you avoid additional fees. However, since carrying cash can sometimes be a hassle, you can opt for a debit card. Some debit cards work like credit cards in that they allow you to build credit and earn rewards for your purchases. For example, Axos Bank’s CashBack Checking offers no fees and up to 1% cash back on signature-based transaction purchases.
Axos Bank CashBack Review
monthly fee
Minimum deposit to open
Minimum balance
Reward
Get up to 1.00% cashback on all transactions that require a signature.
Free ATM network
Refund of ATM fees
All domestic ATM fees are refunded
Subscribe to the CNBC Select newsletter!
Money is important – so make the most of it. Get expert tips, strategies, news and everything else you need to maximize your money straight to your inbox. Login here.
Before purchasing your lottery ticket, make sure you do so with cash or a debit card instead of a credit card. Buying a lottery ticket with a credit card means it will likely be processed as a cash advance, which means higher fees for you. You can still benefit from your purchase with a credit card-like debit card that helps you build credit and earn rewards, such as with Axos Bank CashBack Checking.
Our mission at CNBC Select is to provide our readers with quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every personal finance article is based on the rigorous reporting of our team of experienced writers and editors with extensive knowledge of financial products. While CNBC Select receives a commission from affiliate partners for many offers and links, we create all of our content without input from our commercial team or external third parties and pride ourselves on our journalistic standards and ethics. For more information on how we select the best products, see our methodology.
Check out CNBC Select’s in-depth coverage of Credit cards, Banking And Moneyand keep following us Tick tock, Facebook, Instagram And Twitter to stay up to date.
Editorial note: The opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial team alone and have not been reviewed, approved or otherwise endorsed by any third party.