Most experts say that using a credit card to gamble is a bad idea. First, players are borrowing money to gamble and, second, credit card companies charge high interest rates and fees for gambling related transactions. The policies apply to brick and mortar casinos and internet gambling sites. Some credit card companies ban all gambling transactions. In the UK a letter sent out by a major bank and credit card issuer has raised the hackles of several members of Parliament. MP’s have called for the firing of senior executives at Lloyds TSB.
The trouble started after TSB sent out a letter encouraging customers to use their credit cards for gambling. The letter told clients they would be able to use “up to 50% of this [credit] limit for cash withdrawals and cash related transactions such as gambling, the purchase of foreign currency, money orders and gaming chips.” Many of the cardholders contacted have very high credit limits. One person that received the letter told the Daily Mail that he had been given a high limit and was encouraged to use it to gamble despite the fact that he only makes £12,000 annually.
The TSB promotion is reminiscent of last year’s Barclaycard’s decision to encourage cash withdrawals. Cash withdrawals carry a much higher interest rate than regular purchases. Even if the user pays the entire balance at the end of each month cash advance interest and fees are charged. Consumer groups condemned Barclaycard’s promotion as irresponsible. Senior members of Parliament are angry about the [promotion by state-owned Lloyds. Philip Hammond, Tory shadow chief secretary to the Treasury said he was outraged and told reporters “It beggars belief that a bank so heavily reliant on public funds is promoting itself as a provider of credit for gambling habits. Taxpayers who are on the hook for a bailout worth billions of pounds will be horrified.”
Vince Cable of the Liberal Democrats agreed with Hammond and said action should be taken against Lloyds. Cable stated “The senior management who signed this off need to be fired,” Cable said, simply. It’s quite extraordinary that a publicly owned company is effectively encouraging borrowers to gamble on their credit cards. It is exactly the type of stupid, irresponsible behaviour that has to be stopped.” Cable added that the gambling promotion was even more egregious given the fact that banks have spent so much time explaining why they can’t lend to consumers and businesses with good credit ratings. It will be interesting to see what actions Parliament will take.