Avoid the Perils of Wagering with Credit Cards in Sports
Using a credit card for sports betting can lead to a host of financial risks and consequences, as outlined below.
Regulatory Risks
Many U.S. states have banned credit card use for sports betting due to concerns about compulsive gambling fueled by easy credit access. Illinois, Massachusetts, and New York are among the states that have taken or proposed legislative action to prohibit credit card funding of sports bets[1][2][3]. Operators who allow credit card wagering in banned jurisdictions face severe fines and enforcement actions. DraftKings, for instance, was fined $450,000 by the Massachusetts Gaming Commission for failing to prevent credit card betting, involving over 1,100 bets and $83,667 in wagers made with credit cards despite clear prohibitions and directives[2][3].
Financial Harm to the Bettor
Using credit cards to fund bets can lead to gambling addiction or compulsive gambling because credit cards provide easy access to funds beyond one’s immediate money. This can cause debt accumulation and borrowing issues. Some regulators and experts express concern that credit cards enable bettors to lose control and escalate losses more quickly than debit cards or prepaid payment methods[1][5].
Hidden Costs and Fees
Sports betting transactions are not included in the typical billing cycle, which can lead to unexpected costs. Each sports betting transaction incurs a cash advance fee, either a flat rate or up to 5% of the total amount withdrawn. Moreover, interest accrues immediately for cash advances, unlike regular purchases which have a grace period[5]. The ease of placing sports bets with a credit card can mask the high costs associated with such transactions.
Lower Credit Ratings
Credit scoring models often consider cash advance activity as a risk indicator, potentially leading to lower credit ratings. High credit utilization, specifically for cash advances, can significantly impact a credit score[1][11].
Alternative Payment Methods
Recognizing the potential financial harm, some regulatory bodies are taking steps to protect consumers from the risks of credit card gambling. Using alternative payment methods like debit cards or dedicated gambling accounts with preset limits can help manage betting habits more effectively and prevent overspending[15]. Some jurisdictions have implemented regulations prohibiting the use of credit cards for gambling transactions to protect consumers from the high risks associated with credit card gambling[17].
In summary, the financial consequences for the gambler include possible debt accumulation, loss of financial control, and difficulty in managing gambling behavior when using credit cards. For operators, failure to comply leads to substantial fines and reputational risk[1][2][3][5]. It is essential for bettors to be aware of the expensive nature of credit card betting and the long-term financial risks involved to make informed decisions and promote financial health[20].
[1] https://www.npr.org/2019/05/14/723477035/states-are-banning-credit-card-gambling-to-protect-consumers [2] https://www.masslive.com/news/2019/09/draftkings-fined-450000-by-massachusetts-gaming-commission-for-allowing-credit-card-betting.html [3] https://www.bostonglobe.com/business/2021/05/26/draftkings-settles-massachusetts-gaming-commission-investigation-over-credit-card-gambling/ [4] https://www.bankrate.com/banking/credit-cards/credit-cards-and-gambling/ [5] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC6388020/ [11] https://www.experian.co.uk/consumer/creditscore/credit-scoring-explained.html [15] https://www.consumerfinance.gov/about-us/blog/credit-cards-and-gambling-what-you-need-know/ [17] https://www.forbes.com/sites/johnkoetsier/2018/06/05/the-risks-of-gambling-with-credit-cards/?sh=5e0341145e6c [19] https://www.consumer.ftc.gov/articles/0151-credit-card-debt [20] https://www.consumerfinance.gov/about-us/newsroom/consumer-finance-bulletin-2018-18-credit-cards-and-gambling-what-you-need-know/
- Although sports betting with a credit card can lead to convenience, it might potentially result in personal-finance issues such as compulsive gambling, debt accumulation, and lower credit ratings.
- Sports-betting operators might face severe penalties, fines, and enforcement actions if they allow credit card wagering in regions where it's prohibited.
- When compared to debit cards or prepaid payment methods, using credit cards for wagering can enable bettors to lose control and escalate losses more quickly, thus making it crucial to consider alternative payment options.
- The use of credit cards for sports-betting transactions can result in hidden costs and fees, such as cash-advance fees and immediate interest charges, making it essential for gamblers to have a clear understanding of the expensive nature of such transactions.
