Changes to licence conditions and codes of practice on the use of credit cards for gambling
Motivations for using credit cards to fund gambling
In the consultation we said that it will be important to understand the reasons why consumers choose to use credit cards for gambling (ie as opposed to debit cards or other means of payment), in spite of the fees and charges which apply to credit card gambling. This information will help us to evaluate the impact of any regulatory change on consumers’ behaviours and attitudes, and whether their motivations alter.
The call for evidence gathered little evidence about the motivations among consumers for using credit cards for gambling, or the benefits of using them. We said we would obtain more information as part of the consultation.
We asked specific consultation questions on these subjects to which a number of consumers responded. In order to maximise the available data, we asked 2CV to explore these questions and they received responses from 475 credit card gamblers. We also received responses from around 75 credit card gamblers as part of our quarterly participation tracker exercise in September.
Gamcare and Gordon Moody, which provide treatment services for those experiencing gambling-related harms, coordinated and submitted responses from individuals who had accessed their treatment services and several of them provided information on their motivations for using credit cards. We also received some data in this area through Survey Monkey from individuals who had listened to our podcast on credit card gambling.
Consultation question 23
Why do you choose to use credit cards for gambling?
The full summary of the 2CV research can be accessed here. The reasons given by 2CV research participants for choosing to gamble with credit cards are summarised below. Note that participants could respond with multiple answers but were asked to choose from the options shown on the left side of the table.
|Motivations for using credit cards for gambling||Percentage of responses among 475 credit card gamblers|
|It’s the card I signed up with.||25%|
|For added protection or payment security.||25%|
|I do all or most of my spending on credit cards.||22%|
|I earn benefits (eg rewards offered by the card issuer such as cashback or Air Miles).||22%|
|I didn’t have cash or a debit card with me.||19%|
|So that my gambling doesn’t appear on a bank statement.||14%|
|I didn’t have the money available.||12%|
2CV noted that just over half of participants therefore claimed to use credit cards for gambling either for ‘positive’ reasons (ie payment security or to obtain rewards from the card issuer) or simply out of habit (ie they conduct all spending on credit cards and gambling is no different). A quarter of credit card gamblers in the 2CV work demonstrated ‘problematic’ reasons for using credit cards (ie to hide gambling from their partner or because they have no funds available). Note that approximately half of credit card gamblers who participated in that research had a low ‘gambling literacy’ score (meaning they are more likely to hold misconceptions about gambling or endorse riskier attitudes towards gambling), which 2CV noted is indicative of a stronger potential to experience gambling harm.
Our gambling participation tracker survey includes some consumers who are highly engaged in online gambling, and we would expect a higher rate of gambling harm among such participants than compared to the general population. Around 75 individuals responded to our question asking why they choose to use credit cards for gambling. In contrast to the 2CV research, responses were more balanced between ‘problematic’ and non-problematic motivations for using credit cards. Note that tracker participants responded with free text rather than pre-defined options, and the responses below have been grouped based on broad theme.
|Motivations for using credit cards for gambling||Number of responses among 75 credit card gamblers|
|When no funds are available to them other than through their credit card eg there are insufficient funds available in their bank account||27|
|Credit cards are simply a convenient and easy way to pay||24|
|They use credit cards as a budgeting tool eg they do all of their spending on cards as a means of monitoring their own expenditure||9|
|As a means of chasing gambling losses||5|
|Security (fraud or insolvency protection)||2|
|Accrual of rewards through a scheme provided by the credit card issuer||2|
|The operator only accepted credit cards||2|
|They used to use credit cards to fund gambling, but they have now moved all of their non-gambling leisure spending to credit cards (so that they can instead afford to gamble with their debit cards) – implies they do not have enough funds to gamble and pay for essentials without recourse to credit||2|
|So that their partner does not find out||1|
|To help build their credit rating.||1|
49 Gamcare and Gordon Moody treatment users responded as follows (given that these respondents have accessed treatment services for gambling harm, a skew towards more ‘problematic’ reasons for using credit cards is perhaps expected). These responses were also based on free text.
|Motivations for using credit cards for gambling||Number of responses among 49 who chose to respond|
|No funding was available from any other source||22|
|To chase gambling losses||9|
|Use of a credit card did not feel like real money (a dissociation from the fact that the debt needs to be repaid)||5|
|Convenience or ease of use||5|
|To hide gambling from partner||4|
|To accrue rewards||2|
|For security and fraud protection||1|
|Credit cards make large sums available for use and create a temptation to use them for gambling||1|
A handful of individuals who listened to our podcast explained why they choose to use credit cards to fund their gambling. Their responses were equally mixed among the categories outlined above, with some saying they use credit cards as a way of chasing losses and when no other sources of funds are available, while others said they use credit cards because of the card rewards scheme, for payment security or for budgeting and convenience.
Most consultation respondents who had lived experience of harm from credit card gambling answered this question. Their responses typically explained that credit cards were their only source of funds to continue gambling once they had exhausted other funds, or that they used credit cards in combination with other forms of borrowing in order to fund gambling. Some advised that credit cards had enabled them to hide their gambling from their partner, or that large credit limits enabled them to chase losses. Other respondents advised that they use credit cards to enable them to manage their expenditure, or for payment security.
Consultation question 24
Are you aware of the fees and rates of interest applied by card issuers when a credit card is used for a gambling transaction?
2CV asked their research participants whether they were aware that gambling transactions on a credit card are invariably treated by credit card issuers as cash advances (meaning that fees are incurred for every gambling transaction); and/or whether they were aware that such transactions may incur higher rates of interest than credit card purchases, and that the transaction may incur interest from the date it is made rather than be subject to a grace period.
The responses showed that 82% of 475 credit card gamblers were not fully aware of the financial implications of using credit cards for gambling. Among this cohort:
- 31% were unaware of either the cash advance fees or higher interest rates
- 38% were aware of transaction fees but not that interest rates may be higher
- 14% were aware of potentially higher interest rates but not cash advance fees
- 17% were aware of both, however.
Conversely, almost all consumers who responded to this consultation question, including those with lived experience of harm from credit card gambling, said that they were aware of the fees and interest applied by card issuers to cred card gambling transactions.
Consultation question 25
Do these charges deter you from using credit cards for gambling?
61% of all credit card gamblers participating in the 2CV research said that they would now be deterred from using credit cards for gambling given the associated costs of doing so. Among this cohort:
- 76% of lower risk credit card gamblers said they would now reconsider using credit cards for gambling
- 58% of higher risk credit card gamblers said they would be deterred.
13% of lower risk credit card gamblers said that the knowledge of fees and interest would not act as a deterrent to their using them. However, the figure was higher among higher risk gamblers, with 30% saying they would not be deterred.
Consumers with lived experience of harm advised that the fees and interest never act as a deterrent, despite their being aware of such costs. They advised that they either sought to recoup those costs as part of chasing their overall losses through gambling, or that the associated costs were extremely small compared to the losses they were already incurring. Some who were not at risk of harm said they would never use a credit card for gambling again, having accrued fees without prior knowledge of those charges.
We have partnered with a research organisation to commission an independent evaluation of the ban on credit cards. This evaluation will include an assessment of the impact of the ban on individuals’ gambling behaviour. The data obtained on motivations and attitudes will therefore be helpful to inform that evaluation.
We note that many research participants and respondents advised that they use credit cards for gambling in order to provide them with payment security, because the card issuer offers rewards for credit card use, or simply because they use their credit card as a budgeting tool. We acknowledge of course that individuals who use their credit cards for gambling for these reasons are likely to be at a lower risk of harm than those who use their credit cards because they have no alternative, to chase losses or to hide gambling from their partners.
In pursuing a ban on gambling with credit cards, we are satisfied that the benefits of a ban in reducing the risks of gambling-related harm will outweigh the inconvenience experienced by credit card gamblers who are not at risk of harm.
We note the 2CV data which demonstrates that, while most participants were not fully aware of the fees and interest incurred by credit card gambling, three-quarters of lower risk credit card gamblers also said that now that they were aware, those charges were likely to deter them from using their credit cards for gambling. This suggests that the accrual of fees and potentially higher interest rates for gambling (ie cash advance) transactions may be of a greater inconvenience to the cohort of lower risk credit card gamblers than a ban on credit card gambling itself.
The motivations for using credit cards for gambling are essentially reasons for using credit cards instead of debit cards, or another form of payment, for the same transactions. In this context we note that many of the stated benefits for credit card use are also, to some extent, available through debit cards.
Many banks participate in a chargeback scheme which, while not a legislative requirement, allows for the refund of certain debit card transactions (for example where the transaction is disputed or is made with a merchant that ceases trading). The scheme therefore offers protections for debit cards similar to those afforded by the Consumer Credit Act 1974 (which only applies to credit card transactions greater than £100).
The Payment Services Regulations 2017 also introduced consumer protections for the fraudulent or unauthorised use of debit cards similar to existing protections for credit cards.
Many consumers advised that they accrue benefits from using their credit cards for gambling, for example where the card issuer offers a rewards programme such as cashback, Air Miles, or vouchers. We explored the rewards programmes of ten major credit card issuers and in each of those schemes, ‘cash advance’ transactions including gambling transactions were not eligible to accrue rewards. While some card issuers may allow rewards to accrue for gambling transactions, we have not been provided with evidence to suggest that this is widely prevalent.Previous section
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Evaluation - Changes to licence conditions and codes of practice on the use of credit cards for gambling